Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates
AbstractIn this paper we study the optimal management of an aggregated pension fund of defined benefit type, in the presence of a stochastic interest rate. We suppose that the sponsor can invest in a savings account, in a risky stock and in a bond, with the aim of minimizing deviations of the unfunded actuarial liability from zero along a finite time horizon. We solve the problem by means of optimal stochastic control techniques and analyze the influence on the optimal solution of some of the parameters involved in the model.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we078148.
Date of creation: Dec 2008
Date of revision:
Pension funds; Stochastic control; Optimal portfolio; Stochastic interest rate; 91B28; 93E20; 62P05; 60H10; 60J60; E13; B81;
Other versions of this item:
- Josa-Fombellida, Ricardo & Rincón-Zapatero, Juan Pablo, 2010. "Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates," European Journal of Operational Research, Elsevier, Elsevier, vol. 201(1), pages 211-221, February.
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
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