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dc.contributor.authorPlatanakis, Emmanouil*
dc.contributor.authorSutcliffe, C.*
dc.date.accessioned2016-04-19T11:28:12Z
dc.date.available2016-04-19T11:28:12Z
dc.date.issued2017
dc.identifier.citationPlatanakis E and Sutcliffe C (2017) Asset–liability modelling and pension schemes: the application of robust optimization to USS. The European Journal of Finance. 23(4): 324-352.en_US
dc.identifier.urihttp://hdl.handle.net/10454/8146
dc.descriptionyesen_US
dc.description.abstractThis paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset–liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach to asset allocation. This study is the first to apply it to a real-world pension scheme, and the first ALM model of a pension scheme to maximize the Sharpe ratio. We disaggregate pension liabilities into three components – active members, deferred members and pensioners, and transform the optimal asset allocation into the scheme’s projected contribution rate. The robust optimization model is extended to include liabilities and used to derive optimal investment policies for the Universities Superannuation Scheme (USS), benchmarked against the Sharpe and Tint, Bayes–Stein and Black–Litterman models as well as the actual USS investment decisions. Over a 144-month out-of-sample period, robust optimization is superior to the four benchmarks across 20 performance criteria and has a remarkably stable asset allocation – essentially fix-mix. These conclusions are supported by six robustness checks.en_US
dc.language.isoenen_US
dc.relation.isreferencedbyhttp://dx.doi.org/10.1080/1351847X.2015.1071714en_US
dc.rights© 2015 Taylor & Francis. This is an Author's Original Manuscript of an article published by Taylor & Francis in European Journal of Finance, 2015 available online at http://dx.doi.org/10.1080/1351847X.2015.1071714en_US
dc.subjectRobust Optimization; Pension Scheme; Asset-Liability Model; Sharpe Ratio; Sharpe-Tint; Bayes-Stein; Black-Litterman; Asset–Liability Managementen_US
dc.titleAsset-liability modelling and pension schemes: the application of robust optimization to USSen_US
dc.status.refereedYesen_US
dc.date.Accepted2015-07-08
dc.date.application2015-08-05
dc.typeArticleen_US
dc.type.versionAuthor's final draften_US
refterms.dateFOA2018-07-25T14:23:04Z


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