Operations Research · 2008 · 41 citations · 17 references
ManagementEconomicsRisk ManagementActuarial ScienceInvestment ManagementRisk AnalysisAsset-liability ManagementDefined Benefit PlansPension ObligationsPension PolicyPension TrustsRetirement Security PolicyDefined Benefit Pension TrustsDefined Benefit Public Pension PlansPension Investment StrategyPension Liability RiskPension Simulation ModelingPolicy RulesRisk ConstraintsStochastic Asset-liability Management
The defined-benefit pension system poses substantial, long-term risks for the U.S. economy. We describe a flexible asset-liability management (ALM) system for pension planning. The primary goals are to improve the performance and survivability of the pension trust. We first employ a stochastic program for enhancing investment strategies in light of company and other goals and pension risk constraints. The results are linked with a policy simulator for further analysis. We illustrate the concepts via two disparate real-world companies. The first is a slowly growing auto company, and the second a profitable pharmaceutical enterprise. We show that a stochastic program can help in the process of discovering sound policy rules. The ALM system has been employed extensively throughout the world by a large global actuarial firm.
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Kiriakos Vlahos, Peter Kall, Stein W. Wallace · Journal of the Operational Research Society · 1995 · 805 citations