Annals of Operations Research

, Volume 260, Issue 1–2, pp 515–544 | Cite as

Constant proportion portfolio insurance in defined contribution pension plan management under discrete-time trading

  • Busra Zeynep Temocin
  • Ralf Korn
  • A. Sevtap Selcuk-Kestel
S.I.: Advances of OR in Commodities and Financial Modelling
  • 65 Downloads

Abstract

Portfolio insurance strategies are designed to protect investors against adverse market movements by providing an initially specified guarantee during the investment period. This kind of a protection mechanism is especially important for systems with long investment horizons such as pension plans. In this paper, we consider various versions of the Constant Proportion Portfolio Insurance (CPPI) method under discrete-time trading for a defined-contribution pension plan that includes regular contributions of random size dependent on a stochastic income process. We compare different floor processes for the CPPI with regard to gap-risk and cash-lock probability by computing respective risk measures.

Keywords

Defined-contribution pension plan Portfolio insurance CPPI Discrete-time trading Gap risk Cash-lock risk 

Supplementary material

10479_2017_2638_MOESM1_ESM.pdf (210 kb)
Supplementary material 1 (pdf 209 KB)

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  • Busra Zeynep Temocin
    • 1
  • Ralf Korn
    • 2
    • 3
  • A. Sevtap Selcuk-Kestel
    • 1
  1. 1.Institute of Applied MathematicsMiddle East Technical UniversityAnkaraTurkey
  2. 2.Department of MathematicsUniversity of KaiserslauternKaiserslauternGermany
  3. 3.Department Financial MathematicsFraunhofer ITWMKaiserslauternGermany

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