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Stochastic Methods for Pension Funds

Pierre Devolder, Université catholique de Louvain, Belgium Jacques Janssen, Solvay Business School, Brussels, Belgium Raimondo Manca, University “La Sapienza”, Rome, Italy

ISBN: 9781848212046

Publication Date: January 2012   Hardback   480 pp.

175.00 USD

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The book will present all the stochastic models that can be used for the study of pension schemes and the management of pension funds. Advanced stochastic tools will be used for the construction of the models presented.
Quantitative finance has become an extraordinary field of research over recent years and has been of interest from both an academic point of view as well as for practical applications. At the same time, the issue of pensions will clearly be a major economical and financial topic for the coming decades in the context of the well-known longevity risk.
Surprisingly few books are devoted to the application of modern stochastic tools to pension analysis, the aim of this book is to fill this gap and show how recent stochastic methods can be useful for the risk management of pension funds and the computation of market values.


1. Introduction: Pensions in Perspective.
2. Classical Actuarial Theory of Pension Funding.
3. Deterministic and Stochastic Optimal Control.
4. Defined Contribution and Defined Benefit Pension Plans.
5. Fair and Market Values and Interest Rate Stochastic Models.
6. Risk Modeling and Solvency for Pension Funds.
7. Optimal Control of a Defined Benefit Pension Scheme.
8. Optimal Control of a Defined Contribution Pension Scheme.
9. Simulation Models.
10. Discrete Time Semi-Markov Processes (SMP) and Reward SMP.
11. Generalized Semi-Markov Non-homogeneous Models for Pension Funds and Manpower Management.
Appendix 1. Basic Probabilistic Tools for Stochastic Modeling.
Appendix 2. Itô Calculus and Diffusion Processes.

About the Authors

Pierre Devolder is Professor of quantitative finance and actuarial sciences. He is associate editor of the ASTIN Bulletin and a member of the board of the AFIR section of the International Actuarial Association. His main research interests are pension funding, the application of stochastic processes to finance and insurance, fair valuation and solvency of insurance liabilities.
Jacques Janssen is Honorary Professor at the Solvay Business School in Brussels, Belgium. He is a member of many scientific and actuarial associations (Belgium, France, and Switzerland) and chairman of the International ASMDA Steering Committee. His research interests include stochastic processes, financial and actuarial mathematics, operations research and data mining.
Raimondo Manca is Professor of mathematical methods applied to economics, finance and actuarial science. He is associate editor of the journal Methodology and Computing in Applied Probability. His main research interests are multidimensional linear algebra, computational probability, the application of stochastic processes to economics, finance and insurance and simulation models.


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