IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789811285530_0012.html
   My bibliography  Save this book chapter

The Innovest Austrian Pension Fund Financial Planning Model InnoALM: OR PRACTICE

In: Selected Works of William T Ziemba A Memorial Volume

Author

Listed:
  • Alois Geyer
  • William T Ziemba

Abstract

This paper describes the financial planning model InnoALM we developed at Innovest for the Austrian pension fund of the electronics firm Siemens. The model uses a multiperiod stochastic linear programming framework with a flexible number of time periods of varying length. Uncertainty is modeled using multiperiod discrete probability scenarios for random return and other model parameters. The correlations across asset classes, of bonds, stocks, cash, and other financial instruments, are state dependent using multiple correlation matrices that correspond to differing market conditions. This feature allows InnoALM to anticipate and react to severe as well as normal market conditions. Austrian pension law and policy considerations can be modeled as constraints in the optimization. The concave risk-averse preference function is to maximize the expected present value of terminal wealth at the specified horizon net of expected discounted convex (piecewise-linear) penalty costs for wealth and benchmark targets in each decision period. InnoALM has a user interface that provides visualization of key model outputs, the effect of input changes, growing pension benefits from increased deterministic wealth target violations, stochastic benchmark targets, security reserves, policy changes, etc. The solution process using the IBM OSL stochastic programming code is fast enough to generate virtually online decisions and results and allows for easy interaction of the user with the model to improve pension fund performance. The model has been used since 2000 for Siemens Austria, Siemens worldwide, and to evaluate possible pension fund regulation changes in Austria.

Suggested Citation

  • Alois Geyer & William T Ziemba, 2024. "The Innovest Austrian Pension Fund Financial Planning Model InnoALM: OR PRACTICE," World Scientific Book Chapters, in: Leonard MacLean & Sébastien Lleo (ed.), Selected Works of William T Ziemba A Memorial Volume, chapter 12, pages 201-214, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811285530_0012
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789811285530_0012
    Download Restriction: Ebook Access is available upon purchase.

    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789811285530_0012
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

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

    More about this item

    Keywords

    William Ziemba; Financial Planning Models; Racetrack Betting; Sports Analytics; Market Anomalies; Risk Factors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

    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:wsi:wschap:9789811285530_0012. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    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.