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Continuous‐time optimal pension indexing in pay‐as‐you‐go systems

Continuous‐time optimal pension indexing in pay‐as‐you‐go systems An aging population and the economic crisis have placed pay‐as‐you‐go pension systems in need of mechanisms to ensure their financial stability. In this article, we consider optimal indexing of pensions as an instrument to cope with the financial imbalances typically found in these systems. Using dynamic programming techniques in a stochastic continuous‐time framework, we compute the optimal pension index and portfolio strategy that best target indexing and liquidity objectives determined by the government. A numerical example is provided to illustrate the results. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Stochastic Models in Business and Industry Wiley

Continuous‐time optimal pension indexing in pay‐as‐you‐go systems

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References (30)

Publisher
Wiley
Copyright
© 2022 John Wiley & Sons, Ltd.
ISSN
1524-1904
eISSN
1526-4025
DOI
10.1002/asmb.2670
Publisher site
See Article on Publisher Site

Abstract

An aging population and the economic crisis have placed pay‐as‐you‐go pension systems in need of mechanisms to ensure their financial stability. In this article, we consider optimal indexing of pensions as an instrument to cope with the financial imbalances typically found in these systems. Using dynamic programming techniques in a stochastic continuous‐time framework, we compute the optimal pension index and portfolio strategy that best target indexing and liquidity objectives determined by the government. A numerical example is provided to illustrate the results.

Journal

Applied Stochastic Models in Business and IndustryWiley

Published: May 1, 2022

Keywords: pay‐as‐you‐go; pension indexing; public pensions; social security

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