Constant proportion portfolio insurance in defined contribution pension plan management under discrete-time trading

Date

2018-01-01

Author

TEMOÇİN, BÜŞRA ZEYNEP
KORN, Ralf
Kestel, Sevtap Ayşe

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Portfolio insurance strategies are designed to protect investors against adverse market movements by providing an initially specified guarantee during the investment period. This kind of a protection mechanism is especially important for systems with long investment horizons such as pension plans. In this paper, we consider various versions of the Constant Proportion Portfolio Insurance (CPPI) method under discrete-time trading for a defined-contribution pension plan that includes regular contributions of random size dependent on a stochastic income process. We compare different floor processes for the CPPI with regard to gap-risk and cash-lock probability by computing respective risk measures.

Subject Keywords

Defined-contribution pension plan, Portfolio insurance, CPPI, Discrete-time trading, Gap risk, Cash-lock risk

URI

https://hdl.handle.net/11511/30282

Journal

ANNALS OF OPERATIONS RESEARCH

DOI

https://doi.org/10.1007/s10479-017-2638-5

Collections

Graduate School of Applied Mathematics, Article

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Citation Formats

B. Z. TEMOÇİN, R. KORN, and S. A. Kestel, “Constant proportion portfolio insurance in defined contribution pension plan management under discrete-time trading,” ANNALS OF OPERATIONS RESEARCH, pp. 515–544, 2018, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/30282.