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An Optimal Turkish Private Pension Plan with a Guarantee Feature

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  • Ayşegül İşcanog̃lu-Çekiç

    () (Department of Econometrics, Faculty of Economics and Administrative Sciences, Trakya University, 22030 Edirne, Turkey)

Abstract

The Turkish Private Pension System is an investment system which aims to generate income for future consumption. This is a volunteer system, and the contributions are held in individual portfolios. Therefore, management of the funds is an important issue for both the participants and the insurance company. In this study, we propose an optimal private pension plan with a guarantee feature that is based on Constant Proportion Portfolio Insurance (CPPI). We derive a closed form formula for the optimal strategy with the help of dynamic programming. Moreover, our model is evaluated with numerical examples, and we compare its performance by implementing a sensitivity analysis.

Suggested Citation

  • Ayşegül İşcanog̃lu-Çekiç, 2016. "An Optimal Turkish Private Pension Plan with a Guarantee Feature," Risks, MDPI, Open Access Journal, vol. 4(3), pages 1-12, June.
  • Handle: RePEc:gam:jrisks:v:4:y:2016:i:3:p:19-:d:72852
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    References listed on IDEAS

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    More about this item

    Keywords

    Private Pension Plans; Guaranteed Products; CPPI; HJB-Equation;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law

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