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VaR limits for pension funds: an evaluation

  • Solange M. Berstein
  • R�mulo A. Chumacero

This paper evaluates the effects of imposing Value-at-Risk (VaR) limits and quantitative restrictions on portfolio choices in the context of a risk-based supervision framework for defined contribution pension funds. It shows the conditions under which VaR constraints are equivalent to constraints on volatility. The paper also presents some further considerations that regulators should take into account when adopting a risk-based supervision framework when contributions are mandatory and a significant part of the pension depends on the performance of past investments.

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File URL: http://hdl.handle.net/10.1080/14697688.2010.491517
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Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

Volume (Year): 12 (2012)
Issue (Month): 9 (May)
Pages: 1315-1324

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Handle: RePEc:taf:quantf:v:12:y:2012:i:9:p:1315-1324
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  1. Guidolin, Massimo & Timmermann, Allan G, 2004. "Term Structure of Risk Under Alternative Econometric Specifications," CEPR Discussion Papers 4645, C.E.P.R. Discussion Papers.
  2. Solange M. Berstein & Rómulo A. Chumacero, 2006. "Quantifying the costs of investment limits for Chilean pension funds," Fiscal Studies, Institute for Fiscal Studies, vol. 27(1), pages 99-123, March.
  3. Enrico De Giorgi, . "A Note on Portfolio Selection under Various Risk Measures," IEW - Working Papers 122, Institute for Empirical Research in Economics - University of Zurich.
  4. Alexander, Gordon J. & Baptista, Alexandre M., 2002. "Economic implications of using a mean-VaR model for portfolio selection: A comparison with mean-variance analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1159-1193, July.
  5. Gouriéroux, Christian & Laurent, J.P. & Scaillet, Olivier, 1999. "Sensitivity Analysis of Values at Risk," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Jan 2000.
  6. repec:cup:cbooks:9780521586054 is not listed on IDEAS
  7. Basak, Suleyman & Shapiro, Alexander, 2001. "Value-at-Risk-Based Risk Management: Optimal Policies and Asset Prices," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 371-405.
  8. Christian Gourieroux & Jean-Paul Laurent & Olivier Scaillet, 2000. "Sensitivity Analysis of Values at Risk," Working Papers 2000-05, Centre de Recherche en Economie et Statistique.
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