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Robust Approaches to Pension Fund Asset Liability Management Under Uncertainty

  • Dessislava Pachamanova
  • Nalan Gülpınar
  • Ethem Çanakoğlu
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 245)

Abstract

This entry considers the problem of a typical pension fund that collects premiums from sponsors or employees and is liable for fixed payments to its customers after retirement. The fund manager’s goal is to determine an investment strategy so that the fund can cover its liabilities while minimizing contributions from its sponsors and maximizing the value of its assets. We develop robust optimization and scenario-based stochastic programming approaches for optimal asset-liability management, taking into consideration the uncertainty in asset returns and future liabilities. Our focus is on computational tractability and ease of implementation under conditions typically encountered in practice, such as asymmetries in the distributions of asset returns. Computational results from tests with real and generated data are presented to illustrate the performance of these models.

Keywords

Asset-liability management Uncertainty Stochastic programming Robust optimization Asymmetry 

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Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  • Dessislava Pachamanova
    • 1
  • Nalan Gülpınar
    • 2
  • Ethem Çanakoğlu
    • 3
  1. 1.Mathematics and Sciences DivisionBabson CollegeBabson ParkUSA
  2. 2.Warwick Business SchoolUniversity of WarwickCoventryUK
  3. 3.Industrial EngineeringBahcesehir UniversityIstanbulTurkey

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