Numerical Solutions to Lump-Sum Pension Fund Problems that Can Yield Left-Skewed Fund Return Distributions
OPTIMAL CONTROL AND DYNAMIC GAMES, C. Deissenberg, R.F. Hart, eds., pp. 155-176, 2005
Posted: 13 Jan 2010
There are 2 versions of this paper
Numerical Solutions to Lump-Sum Pension Fund Problems that Can Yield Left-Skewed Fund Return Distributions
Date Written: 2005
Abstract
The paper is about pension fund problems where an agent pays an amount x0 to the fund manager and is repaid, after time T, a lump sum x(T). Such problems admit an analytical solution for specific, rather unrealistic formulations. Several practical pension fund problems are converted in the paper into Markov decision chains solvable through approximations. In particular, a couple of problems with a non-differentiable asymmetric (with respect to risk) utility function are solved, for which left-skewed fund-return distributions are reported. Such distributions ascribe more probability to higher payoffs than the right-skewed ones that are common among analytical solutions.
Keywords: Pension funds, Agent, Manager, Markov, Utility function
JEL Classification: C61, D92, G11
Suggested Citation: Suggested Citation