A stochastic programming model for asset and liability management of a Finnish pension company

TY - JOUR

T1 - A stochastic programming model for asset and liability management of a Finnish pension company

AU - Hilli, Petri

AU - Koivu, Matti

AU - Pennanen, Teemu

AU - Ranne, Antero

PY - 2007/7

Y1 - 2007/7

N2 - This paper describes a stochastic programming model that was developed for asset liability management of a Finnish pension insurance company. In many respects the model resembles those presented in the literature, but it has some unique features stemming from the statutory restrictions for Finnish pension insurance companies. Particular attention is paid to modeling the stochastic factors, numerical solution of the resulting optimization problem and evaluation of the solution. Out-of-sample tests clearly favor the strategies suggested by our model over static fixed-mix and dynamic portfolio insurance strategies.

AB - This paper describes a stochastic programming model that was developed for asset liability management of a Finnish pension insurance company. In many respects the model resembles those presented in the literature, but it has some unique features stemming from the statutory restrictions for Finnish pension insurance companies. Particular attention is paid to modeling the stochastic factors, numerical solution of the resulting optimization problem and evaluation of the solution. Out-of-sample tests clearly favor the strategies suggested by our model over static fixed-mix and dynamic portfolio insurance strategies.

U2 - 10.1007/s10479-006-0135-3

DO - 10.1007/s10479-006-0135-3

M3 - Article

VL - 152

SP - 115

EP - 139

JO - ANNALS OF OPERATIONS RESEARCH

JF - ANNALS OF OPERATIONS RESEARCH

IS - 1

ER -