Regime switching based portfolio selection for pension funds
This paper shows how a mean variance criterion can be applied to a multi period setting in order to obtain efficient portfolios in an asset and liability context. The optimization model allows for rebalancing activities, transaction costs, stochastic volatilities for both assets and liabilities. Fur...
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| Veröffentlicht in: | Journal of banking & finance 2007-08, Vol.31 (8), p.2265-2280 |
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| container_end_page | 2280 |
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| container_issue | 8 |
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| container_title | Journal of banking & finance |
| container_volume | 31 |
| creator | Frauendorfer, Karl Jacoby, Ulrich Schwendener, Alvin |
| description | This paper shows how a mean variance criterion can be applied to a multi period setting in order to obtain efficient portfolios in an asset and liability context. The optimization model allows for rebalancing activities, transaction costs, stochastic volatilities for both assets and liabilities. Furthermore, a general framework for the projection of pension fund liabilities as well as for the generation of asset returns is given. In a further step the dynamics of the liability maturity structure is modeled as customized index, whose volatility and correlation with asset returns become integral components of the applied regime switching approach. The numerical results illustrate the diversification of the assets and its risk return pattern in dependency of the liability dynamics. |
| doi_str_mv | 10.1016/j.jbankfin.2007.02.003 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0378-4266 |
| ispartof | Journal of banking & finance, 2007-08, Vol.31 (8), p.2265-2280 |
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| language | eng |
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| source | RePEc; Elsevier ScienceDirect Journals |
| subjects | Asset valuation Dynamic asset allocation Fund management Liability Modeling of pension fund liabilities Optimization Pension funds Portfolio management Portfolio performance Portfolio selection Projection of the funding ratio Regime switching Stochastic models Stochastic multistage programming Stochastic processes Studies Volatility |
| title | Regime switching based portfolio selection for pension funds |
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