On mathematical models for pension fund optimal selection strategies
DOI:
https://doi.org/10.31150/ajebm.v2i4.91Keywords:
wealth maximization, models, contributions/savings, optimal pension fund selection, risk minimizationAbstract
Pension, being regular payments made to retirees or their beneficiaries after retiring from active service, needs efficient and effective management because of the funds involved as the living standard of the retirees and their dependants rest on it after retirement. In attempt to maximize the wealth of pension contributors, the investors may end up losing the pension fund assets because higher returns on investment go hand in hand with higher risk of loss of invested contributions/savings. This can shatter the hope of not just the contributors/investors but also the entire country as a whole. This research has developed and modified the Dynamic Accumulation Model (DAM) and Risk Minimizing Model (RMM) to aid the optimal fund selection among the four(4) types of fund available in Contributory Pension Scheme (CPS) in Nigeria in order to solve the problem of safety or uncertainty of invested amount. The models strike a balance between the objectives of wealth maximization and risk minimization of pension fund investment in Nigeria.
Downloads
References
Abdulazeez, N. (2014): Pension Scheme in Nigeria: History, Problems and Prospect. Arabian Journal of Business and Management Review 5: 2.
The Nigerian Pension Reform Act (PRA), July 1,2014.
Banwo, F. and Ighodalo, A. (2015): Investing Pension Fund Assets Securely and Profitably. Banwo & Ighodalo Law Firm Publication, Lagos, Nigeria.
Banwo, F. and Ighodalo, A. (2017): The PenCom Regulation of Pension Fund Assets. Banwo &Ighodalo Law Firm Publication, Lagos, Nigeria.
PenCom (2017): The Amended Regulations on Investment of Pension Fund Assets. The National Pension Commission (PenCom), Abuja, Nigeria. www.pencom.gov.ng.
Pratt, J.W. (1964): Risk Aversion in the Small and in the Large. Econometrica Journal, Vol. 32, pp 122-136.
Bergman, U. M. (2005): Lecture Note: Dynamic Optimization and Utility Functions. Institute of Economics, University of Copenhagen, Denmark.
Rockafellar, R. T., Uryasev, S. and Zabarankin, M. (2002): Deviation Measures in Risk Analysis and Optimization. University of Florida, Department of Industrial and Systems Engineering Working Paper No 2002-7.
Markowitz, H. (1952): Portfolio Selection. The Journal of Finance, Vol. 7, pp 77-91.
Pflug, G. and Ruszczynski, A. (2004): Measuring Risk for Income Streams. Risk Measures for the 21st Century . Chapter 13, Wiley Finance.
Follmer, H. and Schied, A. (2002): Stochastic Finance: An Introduction in Discrete Time. Walter de Gruyter, Berlin, Germany.
Chan-Lau, J.A. (2004): Pension Funds and Emerging Markets. International Monetary Fund Working Paper WP/04/181.
Artzner, P., Delbaen, F., Eber, J.M., Heath, D. and Ku, H. (2007): Coherent Measures of Risk. Mathematical Finance, Vol. 9, pp 203 – 228.
Mehra, R. and Prescott, E. (1985): The Equity Premium. Journal of Monetary Economics, Vol.15, pp. 145 – 161.
Halada, L., Lucka, M. and Melichercik, I. (2005): Optimal Multi-stage Portfolio Management Using a Parallel Interior Point Method. Proceedings of Contributed Papers, Slovak University of Technology, pp359-368.
