Financial Crisis: A New Measure for Risk of Pension Fund Portfolios
نویسندگان
چکیده
It has been argued that pension funds should have limitations on their asset allocation, based on the risk profile of the different financial instruments available on the financial markets. This issue proves to be highly relevant at times of market crisis, when a regulation establishing limits to risk taking for pension funds could prevent defaults. In this paper we present a framework for evaluating the risk level of a single financial instrument or a portfolio. By assuming that the log asset returns can be described by a multifractional Brownian motion, we evaluate the risk using the time dependent Hurst parameter H(t) which models volatility. To provide a measure of the risk, we model the Hurst parameter with a random variable with mixture of beta distribution. We prove the efficacy of the methodology by implementing it on different risk level financial instruments and portfolios.
منابع مشابه
The Effects of Parametric Reforms on Retirees’ Welfare and Financial Sustainability of the Social Security Organization Pension System
Extended Abstract Introduction: The World Bank in its 2017 report on Iran, listed three crises for the Iranian economy: pension funds, water security, and ecology. Pension funds crisis can be addressed in many respects, but what is now referred to, as the main problem of pension funds in Iran, is the large financial deficit in the three pension funds: Civil Servants Pension Fund (CSPO), Armed ...
متن کاملThe Effects of Parametric Reforms on Retirees’ Welfare and Financial Sustainability of the Social Security Organization Pension System
Extended Abstract Introduction: The World Bank in its 2017 report on Iran, listed three crises for the Iranian economy: pension funds, water security, and ecology. Pension funds crisis can be addressed in many respects, but what is now referred to, as the main problem of pension funds in Iran, is the large financial deficit in the three pension funds: Civil Servants Pension Fund (CSPO), Armed ...
متن کاملAsset Return in Pension Funds : a dynamical risk analysis
The aim of the paper is to develop a technique for rebalancing pension fund portfolios in function of their pointwise level of risk. The performance of pension funds is often measured by their global asset returns because of the latter’s influence on periodic contributions and/or future benefits. However, in periods of market crisis attention is focused on the risk level given their social secu...
متن کاملA new methodology for deriving the efficient frontier of stocks portfolios: An advanced risk-return model
In this paper after a general literature review on the concept of Efficient Frontier (EF), an important inadequacy of the Variance based models for deriving EFs and the high necessity for applying another risk measure is exemplified. In this regard for this study the risk measure of Lower Partial Moment of the first order is decided to replace Variance. Because of the particular shape of the pr...
متن کاملInvestigating the effects of demographic change on the financial sustainability of the pension fund using the Overlapping Generation Model based on the DSGE model
This study examines the effects of demographic changes including decreasing fertility and increasing life expectancy and retirement age on the financial sustainability of the pension fund in Iran using the overlapping generation model and the Stochastic Dynamic General Equilibrium (DSGE) approach. The results of simulation and evaluation of impulse response functions and evaluation of correlati...
متن کامل