Optimal pension funding through dynamic simulations: the case of Taiwan public employees retirement system

Chang, Shih-Chieh

doi:10.1016/s0167-6687(98)00052-3

Cited by 24 publications

(28 citation statements)

References 15 publications

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“…As an example of a situation in which such a model is appropriate, consider a public pension system. The model analyzed is discussed in Chang (1999) for Tai‐PERS. In his work, future plan members are simulated on the basis of a size‐constrained assumption.…”

Section: Demographic‐based Factorsmentioning

confidence: 99%

“…Bacinello (1988) uses stochastic simulations to obtain the best estimates of plan dynamics. Recently, Chang (1999) combined stochastic simulations and dynamic optimization in deciding the optimal funding policy. He applies the theoretical results to the Taiwan Public Employees Retirement System (Tai‐PERS) and presents the empirical findings.…”

Section: Introductionmentioning

confidence: 99%

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Pension Valuation Under Uncertainties: Implementation of a Stochastic and Dynamic Monitoring System

Chang¹,

Cheng²

2002

J of Risk & Insurance

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Financial soundness and funding stability are two critical issues in pension fund management. First, we construct a generalized stochastic model to monitor the solvency risk and cash flow dynamics of the defined benefit pension plan. A semi-Markov process proposed by Dominicis et al. (1991) and Janssen and Manca (1997) is employed in structuring the transition pattern of the plan's population, and the economic-based factors are generated through plausible stochastic processes. Modifications according to classification and movements of the plan member and the plan's turnover pattern are also employed to improve its practical usefulness. Then the actuarial valuations, cash flow analyses, and workforce projection are performed and investigated. Second, we explicitly formulate the plan dynamics and implement the proposed mechanism into a risk management framework for pension management. By employing the stochastic and dynamic approach, the cost factors can be monitored throughout the valuation process. Third, we outline the procedure of implementing the proposed methodology into a monitoring system. Finally, the Taiwan Public Employees Retirement System is simplified to illustrate techniques in achieving risk management goals.

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Section: Demographic‐based Factorsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Pension Valuation Under Uncertainties: Implementation of a Stochastic and Dynamic Monitoring System

Chang¹,

Cheng²

2002

J of Risk & Insurance

Self Cite

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“…The study of both types of pension plans from the dynamic point of view has been widely discussed in the literature because a great share of the financial operations made in the market by the financial institutions are due to the pension fund activities. See, cf., Boulier et al [1], Vigna and Haberman [2], Haberman and Vigna [3], Deelstra et al [4,5], Battocchio and Menoncin [6], in defined-contribution pension funds, Haberman and Sung [7], Chang [8], Haberman et al [9], Taylor [10], Chang et al [11] and Josa-Fombellida and Rincón-Zapatero [12,13], in defined-benefit pension funds, and Cairns [14], in both types of plans. These papers use the general problem of optimal portfolio in continuous time initially treated in Merton [15,16].…”

Section: Introductionmentioning

confidence: 99%

Funding and investment decisions in a stochastic defined benefit pension plan with several levels of labor-income earnings

Josa-Fombellida¹,

Rincón‐Zapatero²

2008

Computers & Operations Research

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In this paper we consider the optimal management of an aggregated dynamic pension fund. There are n classes of workers whose salaries are stochastic. A portion of the salary is contributed to the funding process and the manager invests in a portfolio with m risky assets and a risk-free security. The main objective is to minimize the cost of contributions in a bounded horizon T and to maximize the utility of final surplus, measured as the relative fund level respect to the mean salary. The aim of the paper is to describe the properties of fund allocation and optimal contribution when salaries differ across contributors to the fund.

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“…Through the literature review in Shimada et.al. (1990), Chang (1999), Chang and Cheng (2002), Chaim (2006Chaim ( , 2007, and Jimeno et al (2008) and from the interview sessions, causal loop diagram is used to analyze the inter-relationships among these factors. Causal loop diagram (also known as feedback loop) is a part of system dynamic modeling which is used to analyze complex relationship that exists in dynamic system.…”

Section: Dynamics Hypothesismentioning

confidence: 99%

Management flight simulator of pension expenditure

Sapiri¹

2012

Int. J. Phys. Sci.

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Salary risk and demographic risk have been identified as main risks in analyzing pension expenditure particularly in defined benefit pension plan. Thus, this paper described the development of management flight simulator for pension expenditure (with particular case on a Malaysia Defined Benefit pension plan). Public pension plan in Malaysia is studied to analyze pension expenditure due to salary and demographic risk. Through the literature review and interview session with several officers in public sector, factors affecting pension expenditure are determined. Then, the inter-relationships between these factors are analyzed through causal loop diagram. The System Dynamics model is later developed using iThink software to show how demographic and salary changes affect pension expenditure. Then, by using actual data, the impact of different policy scenarios on pension expenditure is analyzed. It is shown that dynamics simulation model of pension expenditure is useful to evaluate the impact of changes and policy decisions on risk particularly involving demographic and salary risk.

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Optimal pension funding through dynamic simulations: the case of Taiwan public employees retirement system

Cited by 24 publications

References 15 publications

Pension Valuation Under Uncertainties: Implementation of a Stochastic and Dynamic Monitoring System

Pension Valuation Under Uncertainties: Implementation of a Stochastic and Dynamic Monitoring System

Funding and investment decisions in a stochastic defined benefit pension plan with several levels of labor-income earnings

Management flight simulator of pension expenditure

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