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Optimal pension fund management under multi-period risk minimization

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Abstract

In this paper, a multi-period stochastic optimization model for solving a problem of optimal selection of a pension fund by a pension plan member is presented. In our model, members of the pension plan are given a possibility to switch periodically between J types of funds with different risk profiles and so actively manage their risk exposure and expected return. Minimization of a multi-period average value-at-risk deviation measure under expected return constraint leads to a large-scale linear program. A theoretical framework and a solution for the case of the pension system of Slovak Republic are presented.

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Authors and Affiliations

  1. Department of Applied Mathematics and Statistics, Faculty of Mathematics, Physics and Informatics, Comenius University, Mlynská dolina, 842 48, Bratislava, Slovak Republic

    Soňa Kilianová

  2. Department of Statistics and Decision Support Systems, Faculty of Business, Economics and Statistics, University of Vienna, Universitätsstrasse 5, 1010, Vienna, Austria

    Georg Ch. Pflug

Authors
  1. Soňa Kilianová
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  2. Georg Ch. Pflug
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Correspondence to Soňa Kilianová.

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Kilianová, S., Pflug, G.C. Optimal pension fund management under multi-period risk minimization. Ann Oper Res 166, 261–270 (2009). https://doi.org/10.1007/s10479-008-0405-3

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  • DOI: https://doi.org/10.1007/s10479-008-0405-3

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