A Dynamic Accumulation Model for the Second Pillar of the Slovak Pension System

Since January 2005, pensions in Slovakia are operated by a three-pillar system as proposed by the World Bank. This paper concentrates on the mandatory, fully funded second pillar. The authors present a dynamic accumulation model for determining the optimal switching strategy among pension funds with...

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Veröffentlicht in:Finance a úvěr 2006-01, Vol.56 (11), p.506-521
Hauptverfasser: Sevcovic, Daniel, KILIÁNOVÁ, Soňa, MELICHERČÍK, Igor
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Sprache:eng
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Zusammenfassung:Since January 2005, pensions in Slovakia are operated by a three-pillar system as proposed by the World Bank. This paper concentrates on the mandatory, fully funded second pillar. The authors present a dynamic accumulation model for determining the optimal switching strategy among pension funds with different risk profiles. The resulting strategies depend on the individual risk preferences of future pensioners. The authors´ results illustrated that gradual decreasing risk while amassing savings for a pension is rational. Furthermore, the authors present several simulations of optimal fund-switching strategies for various model parameter settings.
ISSN:0015-1920
2464-7683