Dynamic Asset Allocation under Uncertainty for Pension Fund Management
by
Artur Swietanowski
Institut fuer Statistik, Operations Research und Computerverfahren, Universitaet Wien

Decision making in managing the asset and liability structure of a pension fund can be supported by stochastic dynamic optimization. We discuss our model, which is based on data analysis and forecast for the asset-side as well as a simulation model for the liability side.

The core of our decision support system consists of the following building blocks: (a) a set of securities, (b) a pricing module based on a multifactor Markov model to derive prices of securities, (c) a simulation-based model for liabilities, (d) a carefully chosen objective function suitable for the pension fund operating under Austrian law, (e) stochastic optimization program.

Both the pricing and the simulation based model for liabilities require substantial computing power. Fortunately, both those parts of the decision support system offer opportunities for trivial (and thus most efficient) parallelism.

This research is funded by the Special Research Program SFB F011 'Aurora' supported by the Austrian Science Fund.

Date received: March 1, 1999

Copyright © 1999 by the author(s). The author(s) of this document and the organizers of the conference have granted their consent to include this abstract in Atlas Conferences Inc. Document # cacq-24.