Target variation in a loss avoiding pension fund problem
AbstractThis study builds on the findings in Krawczyk (2008), where a 'cautious relaxed' utility measure is introduced in the solving of a dynamic portfolio management problem. The new measure provides distributions that are left skewed in contrast to the right skewed distributions previously found. This paper builds on these findings by testing the effect of increasing the client's target and introducing the manager's preferences. It is found that increasing the target causes the distribution to become less left skewed, causing higher probabilities of loss. The pension fund manager considering his own payoff does not significantly affect the results and in some cases improves them.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36177.
Date of creation: Nov 2011
Date of revision:
Loss prevention; Numerical analysis; Optimization techniques; Pension funds; Portfolio investment;
Find related papers by JEL classification:
- 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-2012-02-20 (All new papers)
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