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Optimal pension fund composition for an Italian private pension plan sponsor

Sebastiano Vitali (), Vittorio Moriggia () and Miloš Kopa ()
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Sebastiano Vitali: University of Bergamo
Vittorio Moriggia: University of Bergamo
Miloš Kopa: Charles University in Prague

Computational Management Science, 2017, vol. 14, issue 1, 135-160

Abstract: Abstract We address the problem of a private pension plan sponsor who has to find the best pension funds for its members. Starting from a descriptive analysis of the pension plan members we identify a set of representative subscribers. Then, the optimal allocation for each representative will become a pension fund of the pension plan. For each representative, we propose a multistage stochastic program (MSP) which includes a multi-criteria objective function. The optimal choice is the portfolio allocation that minimizes the average value at risk deviation of the final wealth and satisfies a wealth target in the final stage and other constraints regarding pension plan regulations. Stochasticity arises from the investor’s salary process and from asset returns. Numerical results show the optimal dynamic portfolios with respect to the investor’s preferences and then the best pension funds the sponsor might offer.

Keywords: Pension fund; Optimal policy; Multistage stochastic programming; Cluster analysis; 90C15; 91B30 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:spr:comgts:v:14:y:2017:i:1:d:10.1007_s10287-016-0263-4