Finance Department

 

Date of this Version

2002

Document Type

Article

Citation

Journal of Actuarial Practice 10 (2002), pp. 131-154

Comments

Copyright 2002 Absalom Press

Abstract

This paper studies the dynamic funding policy and investment strategy for defined benefit pension plans using one of the most comprehensive dynamic pension models to date. The model includes three investable assets: one risk free and two risky. The optimal plan decisions are formulated as a stochastic control problem that is solved using dynamic programming. The objective function uses performance measures to take into account the stability and solvency of the plan. The model is then applied to a Taiwanese pension.

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