Abstract
This paper introduces the use of dynamic stochastic optimisation for pension fund management. The design of such products involves econometric modelling, economic scenario generation, generic methods of solving optimization problems and modelling of required risk tolerances. In nearly all the historical backtests using data over roughly the past decade the system described (with transactions costs taken into account) outperformed the benchmark S&P500.
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Arbeleche, S., Dempster, M.A.H., Medova, E.A., Thompson, G.W.P., Villaverde, M. (2003). Portfolio Management for Pension Funds. In: Liu, J., Cheung, Ym., Yin, H. (eds) Intelligent Data Engineering and Automated Learning. IDEAL 2003. Lecture Notes in Computer Science, vol 2690. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-45080-1_63
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DOI: https://doi.org/10.1007/978-3-540-45080-1_63
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