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Impulse control of pension fund contributions, in a regime switching economy

Listed author(s):
  • Hainaut, Donatien
Registered author(s):

    In defined benefit pension plans, allowances are independent from the financial performance of the fund. And the sponsoring firm pays regularly contributions to limit deviations of fund assets from the mathematical reserve, necessary for covering the promised liabilities. This research paper proposes a method to optimize the timing and size of contributions, in a regime switching economy. The model takes into consideration important market frictions, like transactions costs, late payments and illiquidity. The problem is solved numerically using dynamic programming and impulse control techniques. Our approach is based on parallel grids, with trinomial links, discretizing the asset return in each economic regime.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0377221714004998
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    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 239 (2014)
    Issue (Month): 3 ()
    Pages: 810-819

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    Handle: RePEc:eee:ejores:v:239:y:2014:i:3:p:810-819
    DOI: 10.1016/j.ejor.2014.06.016
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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