Title: Pension fund ALM with multivariate second order stochastic dominance constraints
Authors: Sebastiano Vitali - University of Bergamo (Italy) [presenting]
Milos Kopa - Charles University (Czech Republic)
Vittorio Moriggia - University of Bergamo (Italy)
Abstract: A pension fund manager typically decides the allocation of the pension fund assets looking for a long-term sustainability. Many Asset and Liability Management models in the form of multistage stochastic programming problem have been proposed to help the pension fund manager to define the optimal allocation given a multi-objective function. The recent literature proposes multivariate stochastic dominance constraints to guarantee that the optimal strategy is able to stochastically dominate a benchmark portfolio in a multistage framework. We extend previous results to a new type of multivariate stochastic dominance. In particular, instead of considering multiple single-stage stochastic dominance constraints or a linear combination of the stages, we apply a unique constraint that involves jointly multiple stages. Numerical results show the difference between the different ways to interpret and apply the multivariate stochastic dominance.