Allocating unfunded liability in pension valuation under uncertainty

This paper studied the cost allocation for the unfunded liability in a defined benefit pension scheme incorporating the stochastic phenomenon of its returns. In the recent literature represented by Cairns and Parker [Insurance: Mathematics and Economics 21 (1997) 43], Haberman [Insurance: Mathematics and Economics 11 (1992) 179; Insurance: Mathematics and Economics 13 (1993) 45; Insurance: Mathematics and Economics 14 (1994) 219; Insurance: Mathematics and Economics 14 (1997) 127], Owadally and Haberman [North American Actuarial Journal 3 (1999) 105], the fund level is modeled based on the plan dynamics and the returns are generated through several stochastic processes to reflect the current realistic economic perspective to see how the contribution changed as the cost allocation period increased. In this study, we generalize the previous constant value assumption in cost amortization by modeling the returns and valuation rates simultaneously. Taylor series expansion is employed to approximate the unconditional and conditional moments of the plan contribution and fund level. Hence the stability of the plan contribution and the fund size under different allocation periods could be estimated, which provide valuable information adding to the previous works.     

Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases

In a financial market with one riskless asset and n risky assets whose prices are lognormal, we solve in a closed form the problem of a pension fund maximizing the expected CRRA utility of its surplus till the (stochastic) death time of a representative agent. We consider a unique asset allocation problem for both accumulation and decumulation phases. The optimal investment in the risky assets must decrease during the first phase and increase during the second one. We accordingly suggest it is not optimal to manage the two phases separately, and outsourcing of allocation decisions should be avoided in both phases. JEL: G23, G11 MSC 2000: 62P05, 91B28, 91B30, 91B70, 93E20     

Following the rules: Integrating asset allocation and annuitization in retirement portfolios

Financial advisers have developed standardized payout strategies to help Baby Boomers manage their money in their golden years. Prominent among these are phased withdrawal plans offered by mutual funds including the “self-annuitization” or default rules encouraged under US tax law, and fixed payout annuities offered by insurers. Using a utility-based framework, and taking account of stochastic capital markets and uncertain lifetimes, we first evaluate these rules on a stand-alone basis for a wide range of risk aversion. Next, we permit the consumer to integrate these standardized payout strategies at retirement and compare the results. We show that integrated strategies can enhance retirees’ well-being by 25%-50% for low/moderate levels of risk aversion when compared to full annuitization at retirement. Finally, we examine how welfare changes if the consumer is permitted to switch to a fixed annuity at an optimal point after retirement. This affords the retiree the chance to benefit from the equity premium when younger, and exploit the mortality credit in later life. For moderately risk-averse retirees, the optimal switching age lies between 80 and 85.     

Mean–variance portfolio and contribution selection in stochastic pension funding

In this paper we study the problem of simultaneous minimization of risks, and maximization of the terminal value of expected funds assets in a stochastic defined benefit aggregated pension plan. The risks considered are the solvency risk, measured as the variance of the terminal fund’s level, and the contribution risk, in the form of a running cost associated to deviations from the evolution of the stochastic normal cost. The problem is formulated as a bi-objective stochastic problem of mean–variance and it is solved with dynamic programming techniques. We find the efficient frontier and we show that the optimal portfolio depends linearly on the supplementary cost of the fund, plus an additional term due to the random evolution of benefits.     

Impulse control of pension fund contributions,in a regime switching economy

In defined benefit pension plans, allowances are independent from the financial performance of the fund. And the sponsoring firm pays regularly contributions to limit deviations of fund assets from the mathematical reserve, necessary for covering the promised liabilities. This research paper proposes a method to optimize the timing and size of contributions, in a regime switching economy. The model takes into consideration important market frictions, like transactions costs, late payments and illiquidity. The problem is solved numerically using dynamic programming and impulse control techniques. Our approach is based on parallel grids, with trinomial links, discretizing the asset return in each economic regime.     

高等教育经费投入对经济增长的驱动力影响实证研究——基于西北五省数据的LMDI分解

以高等教育为主体的人力资本投入对地区经济增长具有推动力已成为经济发展在理论和实践上的普遍认识.首次将LMDI分解法引入高等教育经费投入与GDP增长之间的动态关系实证研究,通过构建GDP总量分解模型,深入分析二者之间内在的因果驱动关系.分析结果表明,对我国而言,代表高等教育经济投入总量的活动效应对GDP变动贡献最大,是主要驱动力;代表教育经费在区域问分布的结构效应对GDP变动影响很小;代表单位教育经费驱动效率的效率效应对GDP增长起到了重要促进作用.     

Exploration of pension funding in case of exact vesting

A pension plan is said to be exactly vested if it provides in addition to the benefit available upon retirement, a benefit, upon termination for any cause prior to retirement, which is exactly equivalent to the actuarial accured liability for the terminating participant.The concept of exact vesting has simple application in defined contribution plans such as those of the Teachers Insurance and Annuity Association. It is also feasible to develop the exact vesting concept for a defined benefit plan which uses an individual type of actuarial cost method. An exactly vested plan would have more individual equity than is available under customary vesting and early retirement provisions of defined benefit plans.In this paper, theory is developed for an exactly vested model plan in parallel to the theory for a pure pension model plan discussed in previous papers on pension funding dynamics.     

Notes on the dynamics of pension funding

The authors follow up some previous work on the dynamics of pension funding by three notes. The first of these concerns contribution rates consisting of the normal cost plus a generalized amortization method for unfunded supplemental present value (actuarial accrued liability). The second note examines aggregate cost funding for active members when there exist consistent difference between the assumed and the actual rates of interest and of growth. The third note explores the operation of a variable annuity system in the context of our general model for pension funding dynamics.     

Random approximations and random fixed point theorems for random 1-setn-contractive non-self-maps in abstract cones

In this paper, we will prove that the random version of Fan's Theorem [6, Theorem 2] is true for a random hemicompact 1-set-contractive map defined on a closed ball, a sphere and an annulus in cones. This class of random 1-set-contractive map includes random condensing maps, random continuous semicontractive maps, random LANE maps, random nonexpansive maps and others. As applications of our theorems, some random fixed point theorems of non-self-maps are proved under various well-known boundary conditions. Our results are generalizations, improvements or stochastic versions of the recent results obtained by many authors