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Title: On the control of defined-benefit pension plans
Authors: 黃泓智
Huang,Hong-Chih;Andrew J.G. Cairns
Keywords: Stochastic pension plan model;Contribution rate;Stability;Minimumvariance;Efficient region;Stochastic interest rates;Asset-allocation strategy
Date: 2006-03
Issue Date: 2008-12-08 11:15:57 (UTC+8)
Abstract: Conventionally, contribution rates for defined-benefit pension plans have been set with reference to funding levels without making allowance for current market interest rates: for example, on one-year bonds where rates of return on fund assets are not independent from one year to the next. We consider how to make use of market information to reduce contribution rate volatility. The purpose of this paper is to provide a model for determining an appropriate contribution rate for defined benefit pension plans under a model where interest rates are stochastic and rates of return are random.We extend previous work in two ways. First, we introduce a model for short-term interest rates, which can be used to help control contribution-rate volatility. Second, we model three assets rather than the usual one (cash, bonds and equities) to allow comparison of different asset strategies. We develop formulae for unconditional means and variances. We then discuss how variability can be controlled most efficiently by setting contribution rates with reference to current funding levels and interest rates.
Relation: Insurance: Mathematics and Economics,38,113-131
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Data Type: article
Appears in Collections:[風險管理與保險學系] 期刊論文

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