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Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates

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Author Info
Ricardo Josa-Fombedilla
Juan Pablo Rincon-Zapatero

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Abstract

In 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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Publisher Info
Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we078148.

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Date of creation: Jun 2008
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Handle: RePEc:cte:werepe:we078148

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Related research
Keywords: Pension funds; Stochastic control; Optimal portfolio; Stochastic interest rate; 91B28; 93E20; 62P05; 60H10; 60J60; E13; B81;

Find related papers by JEL classification:
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

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This page was last updated on 2009-11-26.

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