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.
CITATION STYLE
Consigli, G., Moriggia, V., Benincasa, E., Landoni, G., Petronio, F., Vitali, S., … Uristani, A. (2018). Optimal multistage defined-benefit pension fund management. In International Series in Operations Research and Management Science (Vol. 257, pp. 267–296). Springer New York LLC. https://doi.org/10.1007/978-3-319-61320-8_13
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