Combined Accumulation- and Decumulation-Plans with Risk-Controlled Capital Protection

We base our analysis on an investor, usually a retiree, endowed with a certain amount of wealth W, who considers both his own consumption needs (fixed periodic withdrawals) and the requirement of his heirs (defined bequest). For this purpose he pursues the following in-vestment strategy. The part F is invested in a set of investment funds with the target to achieve an accumulated wealth at the end of a certain time horizon of at least the original amount of wealth W (or the fraction ), measured in real terms. As certain investment risks are implied, we allow for the probability of falling short of the target and implement it into our model as a risk control parameter. The remaining part MM of the original wealth is invested in money market funds in order to avoid additional investment risks and deliver fixed periodic withdrawals until the end of the respective time horizon. The optimal investment strategy is the investment fund allocation that satisfies the probability of shortfall and mini-mizes F, while maximizing the fixed periodic withdrawals. We outline this investment prob-lem in a mathematical model and illustrate the solution for a reasonable choice of empirical parameters.

Pension institutions and annuities in Denmark

This paper considers the overall structure of the Danish pension system, reviews the relative role of different types of pension institutions, and discusses their asset allocation strategies and investment performance. The paper also examines the regulation and supervision of providers of pension services, the growing reliance on risk-based supervision,and the application of the so-called contribution principle. The Danish pension system includes a modest universal social pension with a supplement for low-income pensioners and near universal participation in occupational and personal pensions that are primarily based on defined contribution plans. The annuity market is well developed: 50 percent of annual contributions are allocated to the purchase of deferred annuities, while immediate annuities are also purchased at or even after retirement. However, detailed comprehensive data on the rate of annuitization are lacking. Distinct features of the Danish pension system include the widespread use of profit participating contracts with minimum guaranteed benefits and regular provision of bonuses, covering both the accumulation and payout phases, and extensive use of group deferred annuity contracts. A new traffic light system with periodic stress testing has resulted in greater emphasis on asset liability matching and hedging strategies by pension institutions and a shift in investment policies in favor of foreign bonds and long-term swap contracts.,Debt Markets,Emerging Markets,Pensions&Retirement Systems,Insurance&Risk Mitigation

On the redistributive effects of Germany's feed-in tariff

The present article assesses the redistributive effects of a key element of German climate change policy, the promotion of renewables in the electricity mix through the provision of a feed-in tariff. The tariff shapes the distribution of households' disposable incomes by charging a levy that is proportional to household electricity consumption, and by financial transfers channeled to households feeding green electricity into the grid. Our study builds on representative household survey data, providing information on various socio demographics, household electricity consumption and ownership of solar facilities. The redistributive effects of the feed-in tariff are evaluated by means of various inequality indices. All the inequality measures indicate that Germany's feed-in tariff is mildly regressive. --Income distribution,redistribution,tax incidence,renewable resources,energy policy

Eliciting Public Support for Greening the Electricity Mix Using Random Parameter Techniques

With its commitment to double the share of renewable fuels in electricity generation to at least 30% by 2020, the German government has embarked on a potentially costly policy course whose public support remains an open empirical question. Building on household survey data, in this paper we trace peoples‘ willingness-to-pay (WTP) for various fuel mixes in electricity generation, and capture preference heterogeneity among respondents using random parameter techniques. Based on our estimates, we trace out the locus that links the premia charged for specifi c electricity mixes with the fraction of people supporting the policy. Albeit people‘s WTP for a certain fuel mix in electricity generation is positively correlated to the renewable fuel share, our results imply that the current surcharge eff ectively exhausts the fi nancial scope for subsidizing renewable fuels.Green electricity; willingness-to-pay; preference heterogeneity; policy evaluation

Separation of strangeness from antistrangeness in the phase transition from quark to hadron matter: Possible formation of strange quark matter in heavy-ion collisions

We present a mechanism for the separation of strangeness from antistrangeness in the deconfinement transition. For a net strangeness of zero in the total system, the population of s quarks is greatly enriched in the quark-gluon plasma, while the s¯ quarks drift into the hadronic phase. This separation could result in ‘‘strangelet’’ formation, i.e., metastable blobs of strange-quark matter, which could serve as a unique signature for quark-gluon plasma formation in heavy-ion collisions. PACS: 25.70.Np, 12.38.M

Editorial

Peer reviewedFinal Accepted Versio

Asset/Liability Management of German Life Insurance Companies: A Value-at-Risk Approach in the Presence of Interest Rate Guarantees

This contribution analyses the implications of two major determinants influencing the asset allocation decision of German life insurers, which are the capital market development on the one hand and the interest rate guarantees of the traditional life insurance policies on the other hand. The adverse development of the stock prices between 2000 and 2002 asks for a consideration of not only the �normal� volatility but also the worst-case developments in an asset/liability management. In order to meet the latter requirement, we technically apply the risk measures of Value-at-Risk and Conditional Value-at-Risk. German life insurance policies incorporate interest rate guarantees, which are granted on an annual basis. This specific �myopic� nature of guarantees creates � beyond the control of the shortfall risk in general � the necessity to manage the asset allocation on an annual basis to match the time horizon of assets and liabilities. A quantitative approach analyses the impacts on the asset allocation decision. In our research we do not only consider market valuation, but also institutional peculiarities (such as hidden reserves and accounting norms) of German life insurers. We reveal the possibility of a riskless one-year investment, either based on market values or on book values, to be crucial for guaranteeing interest rates on an annual basis.