Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287483 
Year of Publication: 
2021
Citation: 
[Journal:] Annals of Operations Research [ISSN:] 1572-9338 [Volume:] 302 [Issue:] 1 [Publisher:] Springer US [Place:] New York, NY [Year:] 2021 [Pages:] 85-109
Publisher: 
Springer US, New York, NY
Abstract: 
It is typical in collectively administered pension funds that employees delegate fund managers to invest their contributions. In addition, many pension funds still need to sustain guarantees (prescribed by law) in spite of the current low interest environment. In this paper, we consider an optimal collective investment problem for a pool of investors who (implicitly) demand minimum guarantees by deriving utility from the wealth exceeding their guarantees in two financial market settings, one with a stochastic and one with a constant volatility. We find that individual investors' well-being will not be worsened through the collective investment in both financial markets, as individual optimal solutions are attainable if a financially fair state-dependent sharing rule is applied. When more prevailing sharing rules like linear rules are applied, this holds no longer. Furthermore, the degree of sub-optimality imposed by linear sharing rules is more pronounced in the stochastic volatility market than in the constant volatility market.
Subjects: 
Collective investment problems
Stochastic volatility
portfolio insurance
Sharing rules
JEL: 
G11
G23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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