On loss-avoiding lump-sum pension optimization with contingent targets
Consider a lump-sum pension fund problem, in which an agent deposits an amount with a fund manager up front and is later repaid a lump sum x(T) after time T. The fund manager may be both cautious in seeking a payoff x(T) meeting a certain target, but relaxed toward the possibility of exceeding this target. We use a computational method in stochastic optimal control (“SOCSol”) to find approximately-optimal decision rules for such “cautious-relaxed” fund managers. In particular, we examine fund optimisation problems in which the target is contingent upon market conditions such as inflation.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand|
Phone: +64 (4) 463-5353
Fax: +64 (4) 463-5014
Web page: http://www.victoria.ac.nz/sef
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- repec:spr:compst:v:63:y:2006:i:1:p:169-186 is not listed on IDEAS
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Morck, Randall & Schwartz, Eduardo & Stangeland, David, 1989. "The Valuation of Forestry Resources under Stochastic Prices and Inventories," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(04), pages 473-487, December.
- Mazzoleni, Piera, 2004. "Risk measures and return performance: A critical approach," European Journal of Operational Research, Elsevier, vol. 155(2), pages 268-275, June.
- Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August.
- Gulpinar, Nalan & Rustem, Berc & Settergren, Reuben, 2004. "Simulation and optimization approaches to scenario tree generation," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1291-1315, April.
- Brennan, Michael J. & Schwartz, Eduardo S. & Lagnado, Ronald, 1997. "Strategic asset allocation," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1377-1403, June.
- 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.
- Merton, Robert C., 1971.
"Optimum consumption and portfolio rules in a continuous-time model,"
Journal of Economic Theory,
Elsevier, vol. 3(4), pages 373-413, December.
- R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kang Boda & Jerzy Filar, 2006. "Time Consistent Dynamic Risk Measures," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 63(1), pages 169-186, February.
- Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
- W. H. Fleming & S. J. Sheu, 2000. "Risk-Sensitive Control and an Optimal Investment Model," Mathematical Finance, Wiley Blackwell, vol. 10(2), pages 197-213.
- Howe, M. A. & Rustem, B. & Selby, M. J. P., 1996. "Multi-period minimax hedging strategies," European Journal of Operational Research, Elsevier, vol. 93(1), pages 185-204, August.
- Jacek B. Krawczyk & Alistair Windsor, 1997. "An Approximated Solution to Continuous-Time Stochastic Optimal Control Problems Through Markov Decision Chains," Computational Economics 9710001, EconWPA.
- Hanqing Jin & Xun Yu Zhou, 2008. "Behavioral Portfolio Selection In Continuous Time," Mathematical Finance, Wiley Blackwell, vol. 18(3), pages 385-426.
When requesting a correction, please mention this item's handle: RePEc:vuw:vuwecf:1532. 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: (Library Technology Services)
If references are entirely missing, you can add them using this form.