Cooperative investment in incomplete markets under financial fairness

Multi-period risk sharing under financial fairness

“…The PEFF approach as discussed in this chapter gives no hint on how to adjust the asset mix. Pazdera et al [32] have discussed allocation of financial risk under the PEFF principle when investment decision is endogenous in a single period setting; it may serve as the starting point for multi-period cases.…”

“…In the situation where the risks represent the stochastic investment returns, it may be desirable to include investment decisions which essentially take the distributions of the risks as decision variables as well. Pazdera et al [32] have investigated the possibility of including investment decisions in a single-period environment. The same problem in a multi-period setting is not addressed in this thesis and may be a future topic of interest.…”

“…The distributions of the risks here are assumed to be given throughout the thesis, which excludes the possibility of portfolio optimization in the case of collective investment. PEFF risk sharing with collective investment decisions in a single-period case has been investigated by Pazdera et al [32]. In their research, an extra condition is assumed to sufficiently guarantee the uniqueness of the solution.…”

A Collective Investment Problem in a Stochastic Volatility Environment: The Impact of Sharing Rules

“…The utility function used by the fund manager is itself defined by an optimization problem in such a way that the weighted sum of the individual utility functions is maximized for a given vector of positive weights. Due to the inclusion of guarantee requirements, this is a generalization of a popular utility funciton (with no minimum subsistence level) in the literature [see, for example, Dumas (1989), Karatzas et al (1990), Xia (2004), Pazdera et al (2016), Branger et al (2018b) and Chen et al (2021)]. The fund manager then sets up a collective investment strategy such that all these individual guarantees are met.…”

Economic principles in pension design

“…This principle is sometimes also called financial fairness. Pazdera et al (2016) provide conditions under which there exists a unique risk sharing scheme that is both Pareto efficient and financially fair. Schumacher (2020) explicitly discusses financial fairness under several changes in assumptions in the collective pension model of Gollier (2008).…”