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A Dynamic Model of Pension Fund Companies

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  • Mustafa Akan

Abstract

Two dynamic profit maximizing models of a pension fund company are developed and solved using calculus of variations techniques. Starting with a low portfolio management fee and increasing it gradually to a level of interest rate of Government paper is shown to be the optimal strategy which is contrary to the observed behavior of such companies. Thus, this result should lead the managers of such funds to review their pricing strategies.

Suggested Citation

  • Mustafa Akan, 2013. "A Dynamic Model of Pension Fund Companies," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 13(51), pages 1-20, April.
  • Handle: RePEc:bor:iserev:v:13:y:2013:i:51:p:1-1-20
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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/isereview51.pdf
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    References listed on IDEAS

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    1. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
    2. Sophocles Brissimis & Thomas Vlassopoulos, 2009. "The Interaction between Mortgage Financing and Housing Prices in Greece," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 146-164, August.
    3. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Working Papers 0605, Banco de España;Working Papers Homepage.
    4. Nazif Durmaz, 2011. "Housing Prices and Fundamentals: The Role of a Supply Shifter," Economics Bulletin, AccessEcon, vol. 31(3), pages 2468-2479.
    5. Carliner, Geoffrey, 1973. "Income Elasticity of Housing Demand," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 528-532, November.
    6. Peter Abelson & Roselyne Joyeux & George Milunovich & Demi Chung, 2005. "Explaining House Prices in Australia: 1970-2003," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages 96-103, August.
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    More about this item

    Keywords

    Pension Fund Companies; Dynamic Models; Portfolio Management Fee; Calculus of Variations;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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