Optimal contributions in a defined benefit pension scheme with stochastic new entrants. (English) Zbl 1117.91380

Summary: This paper focuses on the impact of the stochastic evolution of the active membership population on the mismatch between assets and liabilities of a defined benefit pension scheme. Classical results in the actuarial literature on pension plan population theory have been extended to the stochastic case. The paper formulates the trade-off between risk and cost of contribution strategies. Then, using a constrained nonlinear programming approach, optimal contributions strategies have been derived and the trade-off solved by means of identifying an efficient frontier. Finally, a numerical application has been carried out, showing the inefficiency of certain classical normal cost methods.


91B30 Risk theory, insurance (MSC2010)
91D20 Mathematical geography and demography
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