Assisting defined-benefit pension plans

John M. Mulvey, Koray D. Simsek, Zhuojuan Zhang, Frank J. Fabozzi, William R. Pauling

Research output: Contribution to journalArticle

24 Scopus citations

Abstract

The defined-benefit pension system poses substantial, long-term risks for the U.S. economy. We describe a flexible assetliability management (ALM) system for pension planning. The primary goals are to improve the performance and survivability of the pension trust. We first employ a stochastic program for enhancing investment strategies in light of company and other goals and pension risk constraints. The results are linked with a policy simulator for further analysis. We illustrate the concepts via two disparate real-world companies. The first is a slowly growing auto company, and the second a profitable pharmaceutical enterprise. We show that a stochastic program can help in the process of discovering sound policy rules. The ALM system has been employed extensively throughout the world by a large global actuarial firm.

Original languageEnglish (US)
Pages (from-to)1066-1078
Number of pages13
JournalOperations Research
Volume56
Issue number5
DOIs
StatePublished - Sep 1 2008

All Science Journal Classification (ASJC) codes

  • Computer Science Applications
  • Management Science and Operations Research

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    Mulvey, J. M., Simsek, K. D., Zhang, Z., Fabozzi, F. J., & Pauling, W. R. (2008). Assisting defined-benefit pension plans. Operations Research, 56(5), 1066-1078. https://doi.org/10.1287/opre.1080.0526