Pension fund management with investment certificates and stochastic dominance

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F21%3A10438225" target="_blank" >RIV/00216208:11320/21:10438225 - isvavai.cz</a>

Result on the web

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=8UW0yIL7J6" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=8UW0yIL7J6</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10479-020-03855-7" target="_blank" >10.1007/s10479-020-03855-7</a>

Result language

angličtina

Original language name

Pension fund management with investment certificates and stochastic dominance

Original language description

This paper considers an extension of the common asset universe of a pension fund to investment certificates. Investment certificates are a class of structured products particularly interesting for their special payoff structures and they are acquiring relevancy in the worldwide markets. In fact, some subclasses of certificates offer loss protection and show high liquidity and, thus, they can be very appreciated by pension fund managers. We consider the problem of a pension fund manager who has to implement an Asset and Liability Management model trying to achieve a long-term sustainability. Therefore, we formulate a multi-stage stochastic programming problem adopting a discrete scenario tree and a multi-objective function. We propose a technique to price highly structured products such as investment certificates on a discrete scenario tree. Finally, we solve the investment problem considering some investment certificate types both in term of payoff structure and protection level, and we test whether they are preferred or not to standard hedging contract such as put options. Moreover, we test the inclusion of first-order and second-order stochastic dominance constraints on multiple stages with respect to a benchmark portfolio. Numerical results show that the portfolio composition reacts to the inclusion of the stochastic dominance constraints, and that the optimal portfolio is efficiently able to reach several targets such as liquidity, returns, sponsor&apos;s extraordinary contribution and funding gap.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

10103 - Statistics and probability

Project

<a href="/en/project/GX19-28231X" target="_blank" >GX19-28231X: DyMoDiF - Dynamic Models for the Digital Finance</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2021

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Annals of Operations Research

ISSN

0254-5330

e-ISSN

—

Volume of the periodical

299

Issue of the periodical within the volume

1

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

20

Pages from-to

273-292

UT code for WoS article

000587955300002

EID of the result in the Scopus database

2-s2.0-85095699687