IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v266y2018i1d10.1007_s10479-017-2449-8.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10479-017-2449-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10479-017-2449-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    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

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Magnani, Marco, 2024. "An analysis of precautionary behavior in retirement decision making with an application to pension system reform," Insurance: Mathematics and Economics, Elsevier, vol. 117(C), pages 99-113.
    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. 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.
    4. 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).
    5. 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.
    6. 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.
    7. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Busra Zeynep Temocin & Ralf Korn & A. Sevtap Selcuk-Kestel, 2018. "Constant proportion portfolio insurance in defined contribution pension plan management under discrete-time trading," Annals of Operations Research, Springer, vol. 260(1), pages 515-544, January.
    2. Johanna Scheller & Jacques Pézier, 2008. "Optimal Investment Strategies and Performance Sharing Rules for Pension Schemes with Minimum Guarantee," ICMA Centre Discussion Papers in Finance icma-dp2008-09, Henley Business School, University of Reading, revised Oct 2009.
    3. Guohui Guan & Zongxia Liang & Yi xia, 2021. "Optimal management of DC pension fund under relative performance ratio and VaR constraint," Papers 2103.04352, arXiv.org.
    4. Guan, Guohui & Liang, Zongxia, 2016. "Optimal management of DC pension plan under loss aversion and Value-at-Risk constraints," Insurance: Mathematics and Economics, Elsevier, vol. 69(C), pages 224-237.
    5. Alessandro Milazzo & Elena Vigna, 2018. "The Italian Pension Gap: A Stochastic Optimal Control Approach," Risks, MDPI, vol. 6(2), pages 1-20, April.
    6. Juárez-Torres, Miriam & Sánchez-Aragón, Leonardo & Vedenov, Dmitry, 2017. "Weather Derivatives and Water Management in Developing Countries: An Application for an Irrigation District in Central Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(2), May.
    7. Rama Malladi, 2022. "HARI: Characteristics of a new defined lifestyle (DL) retirement planning product," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(2), pages 147-163, June.
    8. Soriano-Morales, Y. V. & Vallejo-Jiménez, Benjamín & Venegas-Martínez, Francisco, 2017. "Impact of the degree of relative risk aversion, the interest rate and the exchange rate depreciation on economic welfare in a small open economy," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 13(25), pages 7-24, Primer se.
    9. Marina Di Giacinto & Salvatore Federico & Fausto Gozzi, 2011. "Pension funds with a minimum guarantee: a stochastic control approach," Finance and Stochastics, Springer, vol. 15(2), pages 297-342, June.
    10. Wu, Huiling & Zhang, Ling & Chen, Hua, 2015. "Nash equilibrium strategies for a defined contribution pension management," Insurance: Mathematics and Economics, Elsevier, vol. 62(C), pages 202-214.
    11. Dormidontova, Yulia & Nazarov, Vladimir & A. Tikhonova, 2014. "Analysis of Approaches of Participants of Pension Products Market to the Development of Optimal Investment Strategies of Pension Savings," Published Papers r90227, Russian Presidential Academy of National Economy and Public Administration.
    12. Salvatore Federico, 2011. "A stochastic control problem with delay arising in a pension fund model," Finance and Stochastics, Springer, vol. 15(3), pages 421-459, September.
    13. Chen, Zheng & Li, Zhongfei & Zeng, Yan & Sun, Jingyun, 2017. "Asset allocation under loss aversion and minimum performance constraint in a DC pension plan with inflation risk," Insurance: Mathematics and Economics, Elsevier, vol. 75(C), pages 137-150.
    14. Zongxia Liang & Yang Liu & Litian Zhang, 2021. "A Framework of State-dependent Utility Optimization with General Benchmarks," Papers 2101.06675, arXiv.org, revised Dec 2023.
    15. Zhang, Ling & Zhang, Hao & Yao, Haixiang, 2018. "Optimal investment management for a defined contribution pension fund under imperfect information," Insurance: Mathematics and Economics, Elsevier, vol. 79(C), pages 210-224.
    16. Guan, Guohui & Liang, Zongxia, 2015. "Mean–variance efficiency of DC pension plan under stochastic interest rate and mean-reverting returns," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 99-109.
    17. Han, Nan-Wei & Hung, Mao-Wei, 2015. "The investment management for a downside-protected equity-linked annuity under interest rate risk," Finance Research Letters, Elsevier, vol. 13(C), pages 113-124.
    18. Alessandro Milazzo & Elena Vigna, 2018. "“The Italian Pension Gap: a Stochastic Optimal Control Approach"," CeRP Working Papers 179, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    19. Josa-Fombellida, Ricardo & Rincón-Zapatero, Juan Pablo, 2010. "Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates," European Journal of Operational Research, Elsevier, vol. 201(1), pages 211-221, February.
    20. Blake, David & Wright, Douglas & Zhang, Yumeng, 2013. "Target-driven investing: Optimal investment strategies in defined contribution pension plans under loss aversion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 195-209.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:266:y:2018:i:1:d:10.1007_s10479-017-2449-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.