A liability tracking approach to long term management of pension funds
AbstractWe propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the liability by directly tracking a benchmark process which represents the liability. Two numerical results using empirical data published by Japanese organizations are served: simulations tracking an artificial liability and an estimated liability of Japanese organization. The latter one demonstrates that our optimal portfolio strategy can hedge his or her liability.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1303.3956.
Date of creation: Mar 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-03-23 (Economics of Ageing)
- NEP-ALL-2013-03-23 (All new papers)
- NEP-CMP-2013-03-23 (Computational Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francesco Menoncin, . "Risk management for pension funds," Working Papers ubs0403, University of Brescia, Department of Economics.
- Marina Di Giacinto & Salvatore Federico & Fausto Gozzi, 2011. "Pension funds with a minimum guarantee: a stochastic control approach," Finance and Stochastics, Springer, vol. 15(2), pages 297-342, June.
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