TY - CHAP
T1 - Performance enhancements for defined benefit pension plans
AU - Mulvey, John Michael
AU - Bauerfeind, Thomas
AU - Simsek, Koray D.
AU - Vural, Mehmet T.
PY - 2011/1/1
Y1 - 2011/1/1
N2 - Over the next several decades, traditional corporate and government pension plans will encounter increasingly severe problems in many countries. Contributing factors include underfunding status, demographic trends, low savings rates, and inefficient investment/saving strategies. This chapter takes up the last point, showing that a systematic forward-looking asset–liability management model can improve performance across many reward and risk measures. The model takes the form of a multi-stage stochastic program. We approximate the stochastic program via a set of state-dependent policy rules. A duration-enhancing overlay rule improves performance during economic contractions. The methodology is evaluated via historical backtests and a highly flexible, forward-looking financial planning tool.
AB - Over the next several decades, traditional corporate and government pension plans will encounter increasingly severe problems in many countries. Contributing factors include underfunding status, demographic trends, low savings rates, and inefficient investment/saving strategies. This chapter takes up the last point, showing that a systematic forward-looking asset–liability management model can improve performance across many reward and risk measures. The model takes the form of a multi-stage stochastic program. We approximate the stochastic program via a set of state-dependent policy rules. A duration-enhancing overlay rule improves performance during economic contractions. The methodology is evaluated via historical backtests and a highly flexible, forward-looking financial planning tool.
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U2 - 10.1007/978-1-4419-9586-5_3
DO - 10.1007/978-1-4419-9586-5_3
M3 - Chapter
AN - SCOPUS:84955293860
T3 - International Series in Operations Research and Management Science
SP - 43
EP - 71
BT - International Series in Operations Research and Management Science
PB - Springer New York LLC
ER -