Conditional indexation has recently attracted interest with pension funds that are looking for a middle way between defined benefit and defined contribution. In this paper, we analyze conditional indexation schemes from a life-cycle investment perspective. Welfare analysis is applied to investigate the performance of such schemes relative to alternative investment strategies such as fixed-mix policies. We carry out this analysis in the context of a broad family of utility functions, which takes into account the possible presence of two benchmark levels corresponding to a minimum guaranty and to full indexation, respectively. For the purpose of comparability, we construct a self-financing continuous-time implementation of the conditional indexation scheme. The implementation involves continual adjustment of the parameters of the contingent claim representing final payoff. Our findings indicate that, in situations where large weight is placed on the benchmark levels, conditional indexation is fairly close to being optimal.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Volume (Year): 8 (2009) Issue (Month): 03 (July) Pages: 321-350 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF