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On loss-avoiding lump-sum pension optimization with contingent targets

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  • Azzato, Jeffrey
  • Krawczyk, Jacek B
  • Sissons, Christopher

Abstract

Consider a lump-sum pension fund problem, in which an agent deposits an amount with a fund manager up front and is later repaid a lump sum x(T) after time T. The fund manager may be both cautious in seeking a payoff x(T) meeting a certain target, but relaxed toward the possibility of exceeding this target. We use a computational method in stochastic optimal control (“SOCSol”) to find approximately-optimal decision rules for such “cautious-relaxed” fund managers. In particular, we examine fund optimisation problems in which the target is contingent upon market conditions such as inflation.

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File URL: http://researcharchive.vuw.ac.nz/handle/10063/1532
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Bibliographic Info

Paper provided by Victoria University of Wellington, School of Economics and Finance in its series Working Paper Series with number 1532.

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Date of creation: 2011
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Handle: RePEc:vuw:vuwecf:1532

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Postal: Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand
Phone: +64 (4) 463-5353
Fax: +64 (4) 463-5014
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Web page: http://www.victoria.ac.nz/sef
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Keywords: lump-sum; pension; optimal; inflation;

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References

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Cited by:
  1. Foster, Jarred & Krawczyk, Jacek B, 2013. "Sensitivity of cautious-relaxed investment policies to target variation," Working Paper Series 2972, Victoria University of Wellington, School of Economics and Finance.
  2. Foster, Jarred, 2011. "Target variation in a loss avoiding pension fund problem," MPRA Paper 36177, University Library of Munich, Germany.

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