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Title: Employees Provident Fund (EPF) Malaysia: Generic models for asset and liability management under uncertainty
Authors: Sheikh Hussin, Siti Aida
Advisors: Mitra, G
Roman, D
Keywords: Stochastic optimisation;Pension fund;Scenario generation;Risk adjusted performance measures (RAPM);Chance constrained and integrated chance constraints programming
Issue Date: 2012
Publisher: Brunel University, School of Information Systems, Computing and Mathematics
Abstract: We describe Employees Provident Funds (EPF) Malaysia. We explain about Defined Contribution and Defined Benefit Pension Funds and examine their similarities and differences. We also briefly discuss and compare EPF schemes in four Commonwealth countries. A family of Stochastic Programming Models is developed for the Employees Provident Fund Malaysia. This is a family of ex-ante decision models whose main aim is to manage, that is, balance assets and liabilities. The decision models comprise Expected Value Linear Programming, Two Stage Stochastic Programming with recourse, Chance Constrained Programming and Integrated Chance Constraints Programming. For the last three decision models we use scenario generators which capture the uncertainties of asset returns, salary contributions and lump sum liabilities payments. These scenario generation models for Assets and liabilities were developed and calibrated using historical data. The resulting decisions are evaluated with in-sample analysis using typical risk adjusted performance measures. Out- of- sample testing is also carried out with a larger set of generated scenarios. The benefits of two stage stochastic programming over deterministic approaches on asset allocation as well as the amount of borrowing needed for each pre-specified growth dividend are demonstrated. The contributions of this thesis are i) an insightful overview of EPF ii) construction of scenarios for assets returns and liabilities with different values of growth dividend, that combine the Markov population model with the salary growth model and retirement payments iii) construction and analysis of generic ex-ante decision models taking into consideration uncertain asset returns and uncertain liabilities iv) testing and performance evaluation of these decisions in an ex-post setting.
Description: This thesis was submitted for the degree of Doctor of Philosophy and awarded by Brunel University.
Appears in Collections:Dept of Mathematics Theses
Mathematical Sciences

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