An Evolutionary Approach to Asset Allocation in Defined Contribution Pension Schemes

  • Kerem Senel
  • A. Bulent Pamukcu
  • Serhat Yanik
Part of the Studies in Computational Intelligence book series (SCI, volume 100)

Summary

With the increasing popularity of defined contribution pension schemes, the related asset allocation problem has become more prominent. The usual portfolio asset allocation approach is far from being appropriate since the asset allocation problem faced by defined contribution pension schemes is fundamentally different. There have been many attempts to solve the problem analytically. However, most of these analytical solutions fail to incorporate real world constraints such as short selling restrictions for the sake of mathematical tractability. In this chapter, we present an evolutionary approach to the asset allocation problem in defined contribution pension schemes. In particular, we compare the simulation results from a genetic algorithm with the results from an analytical model, a simulated annealing algorithm, and two asset allocation strategies that are widely used in practice, namely the life cycle and threshold (funded status) strategies.

Keywords

Genetic Algorithm Risk Measure Pension Fund Simulated Annealing Algorithm Asset Allocation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2008

Authors and Affiliations

  • Kerem Senel
    • 1
  • A. Bulent Pamukcu
    • 2
  • Serhat Yanik
    • 3
  1. 1.Bilgi University, Istanbul Commerce UniversityTurkey
  2. 2.Istanbul Commerce UniversityTurkey
  3. 3.Istanbul UniversityTurkey

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