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Robust Approaches to Pension Fund Asset Liability Management Under Uncertainty

In: Optimal Financial Decision Making under Uncertainty

Author

Listed:
  • Dessislava Pachamanova

    (Babson College)

  • Nalan Gülpınar

    (University of Warwick)

  • Ethem Çanakoğlu

    (Bahcesehir University)

Abstract

This entry considers the problem of a typical pension fund that collects premiums from sponsors or employees and is liable for fixed payments to its customers after retirement. The fund manager’s goal is to determine an investment strategy so that the fund can cover its liabilities while minimizing contributions from its sponsors and maximizing the value of its assets. We develop robust optimization and scenario-based stochastic programming approaches for optimal asset-liability management, taking into consideration the uncertainty in asset returns and future liabilities. Our focus is on computational tractability and ease of implementation under conditions typically encountered in practice, such as asymmetries in the distributions of asset returns. Computational results from tests with real and generated data are presented to illustrate the performance of these models.

Suggested Citation

  • Dessislava Pachamanova & Nalan Gülpınar & Ethem Çanakoğlu, 2017. "Robust Approaches to Pension Fund Asset Liability Management Under Uncertainty," International Series in Operations Research & Management Science, in: Giorgio Consigli & Daniel Kuhn & Paolo Brandimarte (ed.), Optimal Financial Decision Making under Uncertainty, chapter 0, pages 89-119, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-41613-7_4
    DOI: 10.1007/978-3-319-41613-7_4
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    Cited by:

    1. Panos Xidonas & Ralph Steuer & Christis Hassapis, 2020. "Robust portfolio optimization: a categorized bibliographic review," Annals of Operations Research, Springer, vol. 292(1), pages 533-552, September.

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