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Adaptive Strategies for Pension Fund Management

Author

Listed:
  • Raphael Chinchilla
  • Thomas D. Rueter
  • Timothy R. McDade
  • Peter R. Fisher
  • Emmanuel Candes
  • Trevor Hastie
  • Stephen Boyd

Abstract

This paper proposes a simulation-based framework for assessing and improving the performance of a pension fund management scheme. This framework is modular and allows the definition of customized performance metrics that are used to assess and iteratively improve asset and liability management policies. We illustrate our framework with a simple implementation that showcases the power of including adaptable features. We show that it is possible to dissipate longevity and volatility risks by permitting adaptability in asset allocation and payout levels. The numerical results show that by including a small amount of flexibility, there can be a substantial reduction in the cost to run the pension plan as well as a substantial decrease in the probability of defaulting.

Suggested Citation

  • Raphael Chinchilla & Thomas D. Rueter & Timothy R. McDade & Peter R. Fisher & Emmanuel Candes & Trevor Hastie & Stephen Boyd, 2025. "Adaptive Strategies for Pension Fund Management," Papers 2508.13350, arXiv.org.
    • Handle: RePEc:arx:papers:2508.13350
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    References listed on IDEAS

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    4. Ralph Goldsticker, 2007. "A Mutual Fund to Yield Annuity-Like Benefits," Financial Analysts Journal, Taylor & Francis Journals, vol. 63(1), pages 63-67, January.
    5. Pang, Gaobo & Warshawsky, Mark, 2010. "Optimizing the equity-bond-annuity portfolio in retirement: The impact of uncertain health expenses," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 198-209, February.
    6. Misha van Beek, 2020. "Consistent Calibration of Economic Scenario Generators: The Case for Conditional Simulation," Papers 2004.09042, arXiv.org.
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