IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/36177.html
   My bibliography  Save this paper

Target variation in a loss avoiding pension fund problem

Author

Listed:
  • Foster, Jarred

Abstract

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.

Suggested Citation

  • Foster, Jarred, 2011. "Target variation in a loss avoiding pension fund problem," MPRA Paper 36177, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36177
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/36177/1/MPRA_paper_36177.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alistair Windsor & Jacek B. Krawczyk, 1997. "A Matlab Package for Approximating the Solution to a Continuous- Time Stochastic Optimal Control Problem," Computational Economics 9710002, EconWPA.
    2. Yiu, K. F. C., 2004. "Optimal portfolios under a value-at-risk constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1317-1334, April.
    3. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    4. Arjan B. Berkelaar & Roy Kouwenberg & Thierry Post, 2004. "Optimal Portfolio Choice under Loss Aversion," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 973-987, November.
    5. Azzato, Jeffrey & Krawczyk, Jacek B & Sissons, Christopher, 2011. "On loss-avoiding lump-sum pension optimization with contingent targets," Working Paper Series 1532, Victoria University of Wellington, School of Economics and Finance.
    6. Azzato, Jeffrey & Krawczyk, Jacek, 2006. "SOCSol4L An improved MATLAB package for approximating the solution to a continuous-time stochastic optimal control problem," MPRA Paper 1179, University Library of Munich, Germany.
    7. Jacek B. Krawczyk, 2008. "On loss-avoiding payoff distribution in a dynamic portfolio management problem," Journal of Risk Finance, Emerald Group Publishing, vol. 9(2), pages 151-172, February.
    8. Paul A. Samuelson, 2011. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," World Scientific Book Chapters,in: THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 31, pages 465-472 World Scientific Publishing Co. Pte. Ltd..
    9. Samuelson, Paul A, 1974. "Comments on the Favorable-Bet Theorem," Economic Inquiry, Western Economic Association International, vol. 12(3), pages 345-355, September.
    10. Azzato, Jeffrey D. & Krawczyk, Jacek B., 2008. "A parallel Matlab package for approximating the solution to a continuous-time stochastic optimal control problem," MPRA Paper 9993, University Library of Munich, Germany.
    11. 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)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacek B Krawczyk, 2015. "Delivering Left-Skewed Portfolio Payoff Distributions in the Presence of Transaction Costs," Risks, MDPI, Open Access Journal, vol. 3(3), pages 1-20, August.

    More about this item

    Keywords

    Loss prevention; Numerical analysis; Optimization techniques; Pension funds; Portfolio investment;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36177. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.