Target variation in a loss avoiding pension fund problem
This study builds on the findings in Krawczyk (2008), where a 'cautious relaxed' utility measure is introduced in the solving of a dynamic portfolio management problem. The new measure provides distributions that are left skewed in contrast to the right skewed distributions previously found. This paper builds on these findings by testing the effect of increasing the client's target and introducing the manager's preferences. It is found that increasing the target causes the distribution to become less left skewed, causing higher probabilities of loss. The pension fund manager considering his own payoff does not significantly affect the results and in some cases improves them.
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- Cairns, Andrew, 2000. "Some Notes on the Dynamics and Optimal Control of Stochastic Pension Fund Models in Continuous Time," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 30(01), pages 19-55, May. Full references (including those not matched with items on IDEAS)
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