In this article we consider the post-retirement phase optimization problem for a specific pension product in Germany that comes without guarantees. The continuous-time optimization problem is defined consisting of two specialties: first, we have a product-specific pension adjustment mechanism...

This paper explores the application of contingent claims analysis (CCA) to two quot;hotquot; issues in life-cycle finance: (1) investing for retirement and (2) deciding when, if ever, to switch careers. Participants in individual retirement accounts do not have the time or the knowledge to make...

The Pension Bene fit Guaranty Corporation (PBGC) registers a preoccupying financial condition since 2002. This paper builds a theoretical framework for defi ning its optimal asset allocation in a continuous-time stochastic world. We first recognize the PBGC 's put seller nature and derive...

We develop a new class of utility functions, SAHARA utility, with the distinguishing feature that it allows absolute risk aversion to be non-monotone and implements the assumption that agents may become less risk-averse for very low values of wealth. The class contains the well-known exponential...

This paper develops a general continuous-time framework for defining optimal corporate pension policy. Interactions between the firm's optimal investment and financing policies and the defined benefit pension plan optimal portfolio strategy are studied. We prove that the three decision rules are...

Recently, a lot of attention has been focused on developing portfolio allocation models that take into account the asymmetric nature of asset return distributions. In this paper, we extend Krokhmal, Palmquist, and Uryasev's approach by using CVaR-like constraints in the traditional portfolio...

We develop a new class of utility functions, SAHARA utility, with the distinguishing feature that it allows absolute risk aversion to be non-monotone and implements the assumption that agents may become less risk-averse for very low values of wealth. The class contains the well-known exponential...

We derive an expression for the lifetime ruin probability (LRP), defined as the probability a fixed consumption plan will deplete an investment portfolio prior to a retiree's stochastic time of death, assuming the investment return driving the portfolio obeys a jump-diffusion process. This is in...

Inflation for retirees is different from, and mostly higher than, the macroeconomic (average) inflation rate for the entire population. In the U.S. for example, the Consumer Price Index for the Urban population (CPI-U) calculated and reported by the Bureau of Labor Statistics (BLS) has a lesser...