Optimal Multistage Defined-Benefit Pension Fund Management

Giorgio Consigli (), Vittorio Moriggia, Elena Benincasa, Giacomo Landoni, Filomena Petronio, Sebastiano Vitali, Massimo di Tria, Mario Skoric and Angelo Uristani
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Giorgio Consigli: University of Bergamo
Vittorio Moriggia: University of Bergamo
Elena Benincasa: University of Bergamo
Giacomo Landoni: University of Bergamo
Filomena Petronio: University of Bergamo
Sebastiano Vitali: University of Bergamo
Massimo di Tria: Allianz Group
Mario Skoric: Allianz Group
Angelo Uristani: Allianz Group

Chapter Chapter 13 in Handbook of Recent Advances in Commodity and Financial Modeling, 2018, pp 267-296 from Springer

Abstract: Abstract We present an asset-liability management (ALM) model designed to support optimal strategic planning by a defined benefit (DB) occupational pension fund (PF) manager. PF ALM problems are by nature long-term decision problems with stochastic elements affecting both assets and liabilities. Increasingly PFs operating in the second pillar of modern pension systems are subject to mark-to-market accounting standards and constrained to monitor their risk capital exposure over time. The ALM problem is formulated as a multi-stage stochastic program (MSP) with an underlying scenario tree structure in which decision stages are combined with non-decision annual stages aimed at mapping carefully the evolution of PF’s liabilities. We present a case-study of an underfunded PF with an initial liquidity shortage and show how a dynamic policy, relying on a set of specific decision criteria, is able to gain a long-term equilibrium solvency condition over a 20 year horizon.

Keywords: Pension fund management; Multistage stochastic programming; Scenario tree; Solvency ratio; Defined benefits (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-3-319-61320-8_13

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