In this paper we develop and test scenario generation methods for asset liability management models. We propose a multi-stage stochastic programming model for a Dutch pension fund. Both randomly sampled event trees and event trees tting the mean and the covariance of the return distribution are used for generating the coeecients of the stochastic program. In order to investigate the performance...

In this paper, we examine pension schemes and life policies in terms of the option features either implicitly or explicitly contained in them. We argue that this greatly simpli®es the process of managing the asset side of pension fund and life company balance sheets. We show that these options need to be either replicated or hedged with an appropriately determined portfolio of cash market and d...

In this paper, we examine pension schemes and life policies in terms of the option features either implicitly or explicitly contained in them. We argue that this greatly simpli®es the process of managing the asset side of pension fund and life company balance sheets. We show that these options need to be either replicated or hedged with an appropriately determined portfolio of cash market and d...

PURPOSE OF THIS STUDY Basic pension fund in China began investing in the capital market recently. This master’s thesis describes pension investments’ impact on the development of China’s capital market. Based on existing literature, it is shown that if the pension investment has a positive effect on the capital market, capital market development will enhance overall economic development, and it...

2 Pension assets exist to defease the benefit promises made by plan sponsors to participants and beneficiaries—in other words, the pension liability. It follows that pension investment policies should be set in a way that explicitly integrates the exposures of the pension liability. The traditional approach to pension investing has excluded the risks of the liability, which has resulted in port...

We evaluate the economics of financial intermediation in alternative assets by investigating the allocation and performance of pension fund investments in real estate, the most significant alternative asset class for institutional investors. We document substantial heterogeneity in real estate investment cost and performance, determined by two main factors: mandate size and investment approach....

We assess and analyze the three components of active management (asset allocation, market timing and security selection) in the performance of pension funds. Security selection explains most of the differences in pension fund returns. Large pension funds in our sample on average provide value to their clients after accounting for all investment-related costs, both before and after risk-adjustin...

This paper describes a stochastic programming model that was developed for asset liability management of a Finnish pension insurance company. In many respects the model resembles those presented in the literature, but it has some unique features stemming from the statutory restrictions for Finnish pension insurance companies. Particular attention is paid to modeling the stochastic factors, nume...

System dynamics (SD) may amplify asset and liability management (ALM) methodology capability to be risk oriented. Therefore, this paper aims to apply SD principles to ALM models, in the specific case of pension funds. Conceptual issues assigned to ALM variables are described and a dynamic ALM approach, based on SD general principles and risk factors, is then examined. Risk must be defined in ta...