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Constant proportion portfolio insurance in defined contribution pension plan management

Author

Listed:
  • Busra Zeynep Temocin

    (Middle East Technical University)

  • Ralf Korn

    (University of Kaiserslautern and Financial Mathematics)

  • A. Sevtap Selcuk-Kestel

    (Middle East Technical University)

Abstract

We consider the optimal portfolio problem with minimum guarantee protection in a defined contribution pension scheme. We compare various versions of guarantee concepts in a labor income coupled CPPI-framework with random future labor income. Besides classical deterministic guarantees we also introduce path-dependent guarantees. To ensure that there is no bias in the comparison, we obtain the optimal CPPI-multiplier for each guarantee framework via using a classical stochastic control approach.

Suggested Citation

  • Busra Zeynep Temocin & Ralf Korn & A. Sevtap Selcuk-Kestel, 2018. "Constant proportion portfolio insurance in defined contribution pension plan management," Annals of Operations Research, Springer, vol. 266(1), pages 329-348, July.
    • Handle: RePEc:spr:annopr:v:266:y:2018:i:1:d:10.1007_s10479-017-2449-8
    DOI: 10.1007/s10479-017-2449-8
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    References listed on IDEAS

    as
    1. Cairns, Andrew J.G. & Blake, David & Dowd, Kevin, 2006. "Stochastic lifestyling: Optimal dynamic asset allocation for defined contribution pension plans," Journal of Economic Dynamics and Control, Elsevier, vol. 30(5), pages 843-877, May.
    2. Boulier, Jean-Francois & Huang, ShaoJuan & Taillard, Gregory, 2001. "Optimal management under stochastic interest rates: the case of a protected defined contribution pension fund," Insurance: Mathematics and Economics, Elsevier, vol. 28(2), pages 173-189, April.
    3. Philippe Bertrand & Jean-Luc Prigent, 2005. "Portfolio Insurance Strategies: OBPI versus CPPI," Post-Print hal-01833077, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

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    2. Guohui Guan & Zongxia Liang & Yi Xia, 2023. "Optimal management of DB pension fund under both underfunded and overfunded cases," Papers 2302.08731, arXiv.org.
    3. Li, Zhuyue & Zhao, Peixin & Han, Xue, 2022. "Agri-food supply chain network disruption propagation and recovery based on cascading failure," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 589(C).
    4. Chen, An & Hieber, Peter & Nguyen, Thai, 2019. "Constrained non-concave utility maximization: An application to life insurance contracts with guarantees," European Journal of Operational Research, Elsevier, vol. 273(3), pages 1119-1135.
    5. Katia Colaneri & Daniele Mancinelli & Immacolata Oliva, 2024. "On the optimal design of a new class of proportional portfolio insurance strategies in a jump-diffusion framework," Papers 2407.21148, arXiv.org.
    6. An Chen & Thai Nguyen & Manuel Rach, 2021. "A collective investment problem in a stochastic volatility environment: The impact of sharing rules," Annals of Operations Research, Springer, vol. 302(1), pages 85-109, July.
    7. Peyman Alipour & Ali Foroush Bastani, 2023. "Value-at-Risk-Based Portfolio Insurance: Performance Evaluation and Benchmarking Against CPPI in a Markov-Modulated Regime-Switching Market," Papers 2305.12539, arXiv.org.

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    More about this item

    Keywords

    Optimal portfolio; CPPI; Portfolio insurance; Defined contribution pension plans;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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