Lee, Dong-Hwa; Sung, Jooho - In: Risks : open access journal 12 (2024) 2, pp. 1-14
This paper investigates a dynamic liability-driven investment policy for defined-benefit (DB) plans by incorporating the loss aversion of a sponsor, who is assumed to be more sensitive to underfunding than overfunding. Through the lens of prospect theory, we first set up a loss-aversion utility...