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Optimal Multistage Defined-Benefit Pension Fund Management

In: Handbook of Recent Advances in Commodity and Financial Modeling

Author

Listed:
  • Giorgio Consigli

    (University of Bergamo)

  • Vittorio Moriggia

    (University of Bergamo)

  • Elena Benincasa

    (University of Bergamo)

  • Giacomo Landoni

    (University of Bergamo)

  • Filomena Petronio

    (University of Bergamo)

  • Sebastiano Vitali

    (University of Bergamo)

  • Massimo di Tria

    (Allianz Group)

  • Mario Skoric

    (Allianz Group)

  • Angelo Uristani

    (Allianz Group)

Abstract

We present an asset-liability management (ALM) model designed to support optimal strategic planning by a defined benefit (DB) occupational pension fund (PF) manager. PF ALM problems are by nature long-term decision problems with stochastic elements affecting both assets and liabilities. Increasingly PFs operating in the second pillar of modern pension systems are subject to mark-to-market accounting standards and constrained to monitor their risk capital exposure over time. The ALM problem is formulated as a multi-stage stochastic program (MSP) with an underlying scenario tree structure in which decision stages are combined with non-decision annual stages aimed at mapping carefully the evolution of PF’s liabilities. We present a case-study of an underfunded PF with an initial liquidity shortage and show how a dynamic policy, relying on a set of specific decision criteria, is able to gain a long-term equilibrium solvency condition over a 20 year horizon.

Suggested Citation

  • Giorgio Consigli & Vittorio Moriggia & Elena Benincasa & Giacomo Landoni & Filomena Petronio & Sebastiano Vitali & Massimo di Tria & Mario Skoric & Angelo Uristani, 2018. "Optimal Multistage Defined-Benefit Pension Fund Management," International Series in Operations Research & Management Science, in: Giorgio Consigli & Silvana Stefani & Giovanni Zambruno (ed.), Handbook of Recent Advances in Commodity and Financial Modeling, chapter 0, pages 267-296, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-61320-8_13
    DOI: 10.1007/978-3-319-61320-8_13
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    Cited by:

    1. Sebastiano Vitali & Ruth Domínguez & Vittorio Moriggia, 2021. "Comparing stage-scenario with nodal formulation for multistage stochastic problems," 4OR, Springer, vol. 19(4), pages 613-631, December.

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