The Pension Bene fit Guaranty Corporation (PBGC) registers a preoccupying financial condition since 2002. This paper builds a theoretical framework for defi ning its optimal asset allocation in a continuous-time stochastic world. We first recognize the PBGC 's put seller nature and derive...

The paper deals with taxation effects on optimal portfolio rules of de fined contribution (DC) and de fined benefi t (DB) pension funds in a continuous-time setting. Following practice, three tax types are considered: on contributions, investment gains and pensions. We focus on the tax effects...

We analyze the rationale for the pay-as-you-go (paygo) pension system existence on diversi fication grounds. A continuous-time portfolio choice setting is built, basing on Merton (1971)´s analysis, where a reasonable balance between the taking account of the economic and fi nancial facets of...

The existing literature deals with the optimal investment strategy of defined benefit (DB) or defined contribution (DC) pension plans. This paper's objective is to compare the optimal policies of different types of pension plans. This is done by first defining an original framework, which is...

We derive the optimal corporate pension portfolio policy in a consolidated setting in the presence of PBGC insurance. The paper's result formalizes the forces of risk shifting and risk management that shape the form of the corporate pension portfolio. As in Rauh (2009), the risk-shifting and...

When a firm sponsoring a defined benefit pension plan approaches financial distress, the Pension Benefit Guaranty Corporation (PBGC) insurance effect materializes and the optimal pension portfolio policy becomes aggressive. In this configuration, a regulation restricting the pension investment...