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VaR Limits for Pension Funds: An Evaluation

  • Berstein, Solange
  • Chumacero, Rómulo

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://mpra.ub.uni-muenchen.de/22574/1/MPRA_paper_22574.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22574.

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Date of creation: 10 Apr 2010
Date of revision:
Handle: RePEc:pra:mprapa:22574
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  1. Suleyman Basak & Alex Shapiro, . "Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices," Rodney L. White Center for Financial Research Working Papers 6-99, Wharton School Rodney L. White Center for Financial Research.
  2. C. Gourieroux & J.P. Laurent & O. Scaillet, 2000. "Sensitivity analysis of values at risk," THEMA Working Papers 2000-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Solange M. Berstein & Rómulo A. Chumacero, 2003. "Quantifying the Costs of Investment Limits for Chilean Pension Funds," Working Papers Central Bank of Chile 248, Central Bank of Chile.
  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. 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.
  6. Guidolin, Massimo & Timmermann, Allan, 2006. "Term structure of risk under alternative econometric specifications," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 285-308.
  7. repec:fth:inseep:2000-05 is not listed on IDEAS
  8. repec:cup:cbooks:9780521586054 is not listed on IDEAS
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