9,447 research outputs found
Money-back guarantees in individual pension accounts : evidence from the German pension reform
The German Retirement Saving Act instituted a new funded system of supplementary pensions coupled with a general reduction in the level of state pay-as-you-go old-age pensions. In order to qualify for tax relief, the providers of supplementary savings products must offer a guarantee of the nominal value at retirement of contributions paid into these saving accounts. This paper explores how this "money-back" guarantee works and evaluates alternative designs for guarantee structures, including a life cycle model (dynamic asset allocation), a plan with a pre-specified blend of equity and bond investments (static asset allocation), and some type of portfolio insurance. We use a simulation methodology to compare hedging effectiveness and hedging costs associated with the provision of the money-back guarantee. In addition, the guarantee has important implications for regulators who must find an appropriate solvency system for such saving schemes. This version June 17, 2002 . Klassifikation: G11, G23, G2
Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates
In this paper we study the optimal management of an aggregated pension fund of defined
benefit type, in the presence of a stochastic interest rate. We suppose that the sponsor can invest
in a savings account, in a risky stock and in a bond, with the aim of minimizing deviations of
the unfunded actuarial liability from zero along a finite time horizon. We solve the problem by
means of optimal stochastic control techniques and analyze the influence on the optimal
solution of some of the parameters involved in the model
CESAM : The CCSO annual model of the Dutch economy
This paper presents CESAM, a macroeconometric model of the Dutch economy based on annual data. CESAM can be characterized as a Keynesian expenditure model including a neoclassical production model and a post-Keynesian financial model. This characterization holds for most of the Dutch macroeconometric models including, for instance, FREIA-KOMPAS of the Dutch Central Planning Bureau. There are, however, some interesting features that distinguish CESAM from other Dutch models: the production structure is based on a putty-clay vintage approach; the financial model is based on a system of financial accounts and is modelled using the portfolio approach; and the institutional structure of Dutch public finance is described in detail. The main objectives in using the model are to generate medium-term forecasts of the Dutch economy and to analyse economic policy
The Italian Pension Gap: a Stochastic Optimal Control Approach
We study the gap between the state pension provided by the Italian pension
system pre-Dini reform and post-Dini reform. The goal is to fill the gap
between the old and the new pension by joining a defined contribution pension
scheme and adopting an optimal investment strategy that is target-based. We
find that it is possible to cover, at least partially, this gap with the
additional income of the pension scheme, especially in the presence of late
retirement and in the presence of stagnant career. Workers with dynamic career
and workers who retire early are those who are most penalised by the reform.
Results are intuitive and in line with previous studies on the subject
Time is money: life cycle rational inertia and delegation of investment management : [Version November 2013]
We investigate the theoretical impact of including two empirically-grounded insights in a dynamic life cycle portfolio choice model. The first is to recognize that, when managing their own financial wealth, investors incur opportunity costs in terms of current and future human capital accumulation, particularly if human capital is acquired via learning by doing. The second is that we incorporate age-varying efficiency patterns in financial decisionmaking. Both enhancements produce inactivity in portfolio adjustment patterns consistent with empirical evidence. We also analyze individuals’ optimal choice between self-managing their wealth versus delegating the task to a financial advisor. Delegation proves most valuable to the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs, as well as delegation, in a life cycle setting
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Asset liability management using stochastic programming
This chapter sets out to explain an important financial planning model
called asset liability management (ALM); in particular, it discusses why in
practice, optimum planning models are used. The ability to build an integrated
approach that combines liability models with that of asset allocation
decisions has proved to be desirable and more efficient in that it can lead to
better ALM decisions. The role of uncertainty and quantification of risk in
these planning models is considered
Upgrading investment regulations in second pillar pension systems : a proposal for Colombia
The passivity of the demand for pension products is one of the striking features of mandatory pension systems. Consequently, the provision of multiple investment alternatives to households (multifund schemes) does not ensure that contributions are invested efficiently. In addition, despite the theoretical findings that short term return maximization is not conductive to long-term return maximization, the regulatory framework of pension fund management companies puts excessive emphasis on short-term maximization. Therefore, it is not obvious that typical regulatory framework of pension funds is conductive to optimal pensions. By establishing a set of default options on investment portfolios, this paper proposes a mechanism to align the incentives of the pension fund management companies with the long-term objectives of the contributors. The paper provides a methodology, which is subsequently applied to Colombia.Debt Markets,Emerging Markets,Financial Literacy,Mutual Funds,Investment and Investment Climate
Should the Indonesian pension funds invest abroad?
Currently, the Indonesian pension fund is prohibited from investing in international assets. In this paper, I quantitatively investigate the benefit and/or the cost, if any, caused by this constraint. Standard mean-variance techniques will be used along with Monte Carlo simulation to check the robustness of the findings. Under various assumptions, including international assets in the pension fund’s portfolio could potentially aid pension funds to have higher returns and accumulated wealth. Accordingly, the findings suggest possible reform to lessen these restrictions. Given the controversy over international diversification, a reasonable compromise that would help capture many of the potential benefits for risk-averse investors could be to create a ceiling of 20 percent for international assets.Pension Fund; International Diversification; Asset Allocation; Hypothetical Worker; Indonesia
Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates.
In this paper we study the optimal management of an aggregated pension fund of defined benefit type, in the presence of a stochastic interest rate. We suppose that the sponsor can invest in a savings account, in a risky stock and in a bond with the aim of minimizing deviations of the unfunded actuarial liability from zero along a finite time horizon. We solve the problem by means of optimal stochastic control techniques and analyze the influence on the optimal solution of some of the parameters involved in the model.Pension funds; Stochastic control; Optimal portfolio; Stochastic interest rate;
Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates
In this paper we study the optimal management of an aggregated pension fund of defined benefit type, in the presence of a stochastic interest rate. We suppose that the sponsor can invest in a savings account, in a risky stock and in a bond, with the aim of minimizing deviations of the unfunded actuarial liability from zero along a finite time horizon. We solve the problem by means of optimal stochastic control techniques and analyze the influence on the optimal solution of some of the parameters involved in the model.Pension funds, Stochastic control, Optimal portfolio, Stochastic interest rate, 91B28, 93E20, 62P05, 60H10, 60J60, E13, B81
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