Individual optimal pension allocation under stochastic dominance constraints

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F18%3A10384551" target="_blank" >RIV/00216208:11320/18:10384551 - isvavai.cz</a>

Výsledek na webu

<a href="https://doi.org/10.1007/s10479-016-2387-x" target="_blank" >https://doi.org/10.1007/s10479-016-2387-x</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10479-016-2387-x" target="_blank" >10.1007/s10479-016-2387-x</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Individual optimal pension allocation under stochastic dominance constraints

Popis výsledku v původním jazyce

An individual investor has to decide how to allocate his/her savings from a retirement perspective. This problem covers a long-term horizon. In this paper we consider a 40-year horizon formulating a multi-criteria multistage program with stochastic dominance constraints in an intermediate stage and in the final stage. As we are dealing with a real problem and we have formulated the model in cooperation with a commercial Italian bank, the intermediate stage corresponds to a possible withdrawal allowed by the Italian pension system. The sources of uncertainty considered are: the financial returns, the interest rate evolution, the investor&apos;s salary process and a considerable withdrawal event. We include a set of portfolio constraints according to the pension plan regulation. The objective of the model is to minimize the Average Value at Risk Deviation measure and to satisfy wealth goals. Three different wealth target formulations are considered: a deterministic wealth target (i.e. a comparison between the accumulated average wealth and a fixed threshold) and two stochastic dominance relations-the first order and the second order-introducing a benchmark portfolio and then requiring the optimal portfolio to dominate the benchmark. In particular, we prove that solutions obtained under stochastic dominance constraints ensure a safer allocation while still guaranteeing good returns. Moreover, we show how the withdrawal event affects the solution in terms of allocation in each of the three frameworks. Finally, the sensitivity and convergence of the stochastic solutions and computational issues are investigated.

Název v anglickém jazyce

Individual optimal pension allocation under stochastic dominance constraints

Popis výsledku anglicky

An individual investor has to decide how to allocate his/her savings from a retirement perspective. This problem covers a long-term horizon. In this paper we consider a 40-year horizon formulating a multi-criteria multistage program with stochastic dominance constraints in an intermediate stage and in the final stage. As we are dealing with a real problem and we have formulated the model in cooperation with a commercial Italian bank, the intermediate stage corresponds to a possible withdrawal allowed by the Italian pension system. The sources of uncertainty considered are: the financial returns, the interest rate evolution, the investor&apos;s salary process and a considerable withdrawal event. We include a set of portfolio constraints according to the pension plan regulation. The objective of the model is to minimize the Average Value at Risk Deviation measure and to satisfy wealth goals. Three different wealth target formulations are considered: a deterministic wealth target (i.e. a comparison between the accumulated average wealth and a fixed threshold) and two stochastic dominance relations-the first order and the second order-introducing a benchmark portfolio and then requiring the optimal portfolio to dominate the benchmark. In particular, we prove that solutions obtained under stochastic dominance constraints ensure a safer allocation while still guaranteeing good returns. Moreover, we show how the withdrawal event affects the solution in terms of allocation in each of the three frameworks. Finally, the sensitivity and convergence of the stochastic solutions and computational issues are investigated.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

10103 - Statistics and probability

Projekt

<a href="/cs/project/GA15-02938S" target="_blank" >GA15-02938S: Stochastická dominance v úlohách operačního výzkumu</a><br>

Návaznosti

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

Rok uplatnění

2018

Kód důvěrnosti údajů

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

Název periodika

Annals of Operations Research

ISSN

0254-5330

e-ISSN

—

Svazek periodika

260

Číslo periodika v rámci svazku

1-2

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

37

Strana od-do

255-291

Kód UT WoS článku

000419148700013

EID výsledku v databázi Scopus

2-s2.0-85006379697