Abstract The present paper analyzes an optimal consumption and investment problem of a retiree with a constant relative risk aversion (CRRA) who faces parameter uncertainty about the financial market. We solve the optimization problem under partial information by making the market...

The present paper investigates the net loss of a life insurance company issuing equity-linked pure endowments in the case of periodic premiums. Due to the untradability of the insurance risk which affects both the in- and outflow side of the company, the issued insurance claims cannot be hedged...

This paper compares two different types of private retirement plans from the perspective of a representative beneficiary: a defined benefit (DB) and a defined contribution (DC) plan. While salary risk is the main common risk factor in DB and DC pension plans, one of the key differences is that...

This article uses contingent claims analysis and regulatory constraints to show how a bank can create incentive-compatible compensation for the senior management aligned with the interests of the other stakeholders. For this purpose, the remuneration package takes the form of a 'call spread' on...

This paper develops a risked-based premium calculation model for the insurance provided by the Pension Benefit Guaranty Corporation (PBGC). It takes account of the pension fund’s and the plan sponsor’s investment policy and extends Chen (2011) by considering distress termination triggered by...

Adequate funding of occupational pension plans is key to benefit security. Across countries different methods of securing funding exist: solvency requirements, a pension guarantee fund, and sponsor support. The key goal of this paper is to investigate the welfare implications to the beneficiary...

This paper considers a utility maximization and optimal asset allocation problem in the presence of a stochastic endowment that cannot be fully hedged through trading in the financial market. We rely on the dynamic programming approach to solve the optimization problem. The properties of the...

In the US, defined benefit plans are insured by the Pension Benefit Guaranty Corporation (PBGC). Taking account of the fact that the PBGC covers only the residual deficits of the pension fund the sponsoring company is unable to cover and that the plans can be prematurely terminated, we consider...