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Portfolio optimization in a defined benefit pension plan where the risky assets are processes with constant elasticity of variance

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorJosa Fombellida, Ricardo
dc.contributor.authorLópez Casado, Paula
dc.contributor.authorRincón-Zapatero, Juan Pablo
dc.contributor.funderMinisterio de Economía, Industria y Competitividad (España)
dc.contributor.funderComunidad de Madrid
dc.contributor.funderComunidad de Castilla y León
dc.date.accessioned2022-04-28T13:20:23Z
dc.date.available2022-04-28T13:20:23Z
dc.date.issued2018-09-01
dc.description.abstractThe paper studies the optimal asset allocation problem of a defined benefit pension plan that operates in a financial market composed of risky assets whose prices are constant elasticity variance processes. The benefits paid to the participants are deterministic. The contributions to the fund are designed by a spread amortization method, which takes into account the size of the unfunded actuarial liability, defined as the difference between the actuarial liability and the fund assets. We address the case where the fund manager wishes to minimize the solvency risk at the final date of the plan when the fund is underfunded, as well as the case where the fund manager wishes to maximize an increasing, constant elasticity utility function of the fund surplus, when the fund is overfunded. The optimal portfolio and contributions are obtained in both scenarios, with the help of the Hamilton-Jacobi-Bellman equation. A numerical illustration shows the evolution of the plan for several values of the elasticity parameter of the CEV price processes and the risk aversion of the manager, yielding some tips on the main properties of the optimal portfolioen
dc.description.sponsorshipThe authors are grateful to the managing editor and two anonymous referees for their comments and suggestions. Support from the Ministerio de Economía, Industria y Competitividad (Spain), grants ECO2011-24200, ECO2014-56384-P, MDM 2014-0431 and ECO2017-86261-P, the Comunidad de Madrid, MadEco-CM S2015/HUM-3444, and the Comunidad de Castilla y León , VA148G18, is gratefully acknowledged.en
dc.identifier.bibliographicCitationJosa-Fombellida, R., López-Casado, P., & Rincón-Zapatero, J. P. (2018). Portfolio optimization in a defined benefit pension plan where the risky assets are processes with constant elasticity of variance. Insurance: Mathematics and Economics, 82, pp. 73-86.es
dc.identifier.doihttps://doi.org/10.1016/j.insmatheco.2018.06.011
dc.identifier.issn0167-6687
dc.identifier.publicationfirstpage73es
dc.identifier.publicationlastpage86es
dc.identifier.publicationtitleINSURANCE MATHEMATICS & ECONOMICSes
dc.identifier.publicationvolume82es
dc.identifier.urihttps://hdl.handle.net/10016/34653
dc.identifier.uxxiAR/0000022255
dc.language.isoenges
dc.publisherElsevieres
dc.relation.projectIDGobierno de España. ECO2011-24200es
dc.relation.projectIDGobierno de España. ECO2014-56384-Pes
dc.relation.projectIDGobierno de España. ECO2017-86261-Pes
dc.rights© 2018 Elsevier B.V. All rights reserved.es
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España*
dc.rights.accessRightsopen accesses
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/*
dc.subject.ecienciaEconomíaes
dc.subject.jelG22
dc.subject.jelG11
dc.subject.jelC61
dc.subject.otherPension fundingen
dc.subject.otherDynamic programmingen
dc.subject.otherCEV processen
dc.subject.otherRisk managementes
dc.subject.otherOptimal portfolioen
dc.titlePortfolio optimization in a defined benefit pension plan where the risky assets are processes with constant elasticity of varianceen
dc.typeresearch article*
dc.type.hasVersionAM*
dspace.entity.typePublication
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