Robustness for Asset-Liability Management of Pension Funds

Ferenc Horváth, Frank de Jong, Bas Werker

Research output: Working paperDiscussion paperOther research output

153 Downloads (Pure)

Abstract

We survey the literature on robust dynamic asset allocation with an emphasis on the asset-liability management of pension funds. After demonstrating the difference between risk and uncertainty (Section 1), we introduce two levels of uncertainty: parameter uncertainty and model uncertainty (Section 2.1). We describe four of the most widely used approaches in robust dynamic asset allocation problems: the penalty approach, the constraint approach, the Bayesian approach and the approach of smooth recursive preferences (Sections 2.4-2.7). In Section 3 we demonstrate the importance of uncertainty for investors (including pension funds) from both a normative and a positive aspect, then we review the literature on robust asset management and on robust asset-liability management. Section 4 concludes.
Original languageEnglish
Place of PublicationTilburg
PublisherNETSPAR
Number of pages46
Publication statusPublished - 2016

Publication series

NameNetspar Industry Paper
VolumeSurvey 47

Fingerprint

Asset-liability management
Pension funds
Robustness
Dynamic asset allocation
Uncertainty
Asset management
Parameter uncertainty
Bayesian approach
Investors
Penalty
Risk and uncertainty
Allocation problem
Model uncertainty
Recursive preferences

Cite this

Horváth, F., de Jong, F., & Werker, B. (2016). Robustness for Asset-Liability Management of Pension Funds. (Netspar Industry Paper; Vol. Survey 47). Tilburg: NETSPAR.
Horváth, Ferenc ; de Jong, Frank ; Werker, Bas. / Robustness for Asset-Liability Management of Pension Funds. Tilburg : NETSPAR, 2016. (Netspar Industry Paper).
@techreport{6f52f3db53b344228cbadd37f32d0fb7,
title = "Robustness for Asset-Liability Management of Pension Funds",
abstract = "We survey the literature on robust dynamic asset allocation with an emphasis on the asset-liability management of pension funds. After demonstrating the difference between risk and uncertainty (Section 1), we introduce two levels of uncertainty: parameter uncertainty and model uncertainty (Section 2.1). We describe four of the most widely used approaches in robust dynamic asset allocation problems: the penalty approach, the constraint approach, the Bayesian approach and the approach of smooth recursive preferences (Sections 2.4-2.7). In Section 3 we demonstrate the importance of uncertainty for investors (including pension funds) from both a normative and a positive aspect, then we review the literature on robust asset management and on robust asset-liability management. Section 4 concludes.",
author = "Ferenc Horv{\'a}th and {de Jong}, Frank and Bas Werker",
year = "2016",
language = "English",
series = "Netspar Industry Paper",
publisher = "NETSPAR",
type = "WorkingPaper",
institution = "NETSPAR",

}

Horváth, F, de Jong, F & Werker, B 2016 'Robustness for Asset-Liability Management of Pension Funds' Netspar Industry Paper, vol. Survey 47, NETSPAR, Tilburg.

Robustness for Asset-Liability Management of Pension Funds. / Horváth, Ferenc; de Jong, Frank; Werker, Bas.

Tilburg : NETSPAR, 2016. (Netspar Industry Paper; Vol. Survey 47).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Robustness for Asset-Liability Management of Pension Funds

AU - Horváth, Ferenc

AU - de Jong, Frank

AU - Werker, Bas

PY - 2016

Y1 - 2016

N2 - We survey the literature on robust dynamic asset allocation with an emphasis on the asset-liability management of pension funds. After demonstrating the difference between risk and uncertainty (Section 1), we introduce two levels of uncertainty: parameter uncertainty and model uncertainty (Section 2.1). We describe four of the most widely used approaches in robust dynamic asset allocation problems: the penalty approach, the constraint approach, the Bayesian approach and the approach of smooth recursive preferences (Sections 2.4-2.7). In Section 3 we demonstrate the importance of uncertainty for investors (including pension funds) from both a normative and a positive aspect, then we review the literature on robust asset management and on robust asset-liability management. Section 4 concludes.

AB - We survey the literature on robust dynamic asset allocation with an emphasis on the asset-liability management of pension funds. After demonstrating the difference between risk and uncertainty (Section 1), we introduce two levels of uncertainty: parameter uncertainty and model uncertainty (Section 2.1). We describe four of the most widely used approaches in robust dynamic asset allocation problems: the penalty approach, the constraint approach, the Bayesian approach and the approach of smooth recursive preferences (Sections 2.4-2.7). In Section 3 we demonstrate the importance of uncertainty for investors (including pension funds) from both a normative and a positive aspect, then we review the literature on robust asset management and on robust asset-liability management. Section 4 concludes.

M3 - Discussion paper

T3 - Netspar Industry Paper

BT - Robustness for Asset-Liability Management of Pension Funds

PB - NETSPAR

CY - Tilburg

ER -

Horváth F, de Jong F, Werker B. Robustness for Asset-Liability Management of Pension Funds. Tilburg: NETSPAR. 2016. (Netspar Industry Paper).