@article {Mulvey165, author = {John M. Mulvey and Lionel Martellini and Han Hao and Nongchao Li}, title = {A Factor- and Goal-Driven Model for Defined Benefit Pensions: Setting Realistic Benefits}, volume = {45}, number = {3}, pages = {165--177}, year = {2019}, doi = {10.3905/jpm.2019.45.3.165}, publisher = {Institutional Investor Journals Umbrella}, abstract = {A factor and goal-driven framework for assessing asset allocation and contribution decisions within defined-benefit pension plans is developed in this article. A critical element is setting future benefits with reference to the ability of the pension sponsors to support liabilities under reasonable investment expectations. The approach suggested by the authors combines a micro study of a representative cohort of individuals with an aggregation across a target population to estimate consistency between the micro and macro environments. A stochastic inflation risk factor affects both contribution and spending cash flows. This agent-based model suggested by the authors provides a more realistic framework than traditional approaches for setting pension benefits.TOPICS: Factor-based models, pension funds, futures and forward contracts}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/45/3/165}, eprint = {https://jpm.pm-research.com/content/45/3/165.full.pdf}, journal = {The Journal of Portfolio Management} }