A Stochastic Network Approach for Integrating Pension and Corporate Financial Planning

This paper presents a multi-period stochastic network model for integrating corporate financial and pension planning.

Author(s):

John M. Mulvey

Department of Operations Research and Financial EngineeringBendheim Center for Finance , Princeton University

Bill Pauling

Towers Perrin

Koray D. Simsek

Assistant Professor of Finance, EDHEC Business SchoolResearch Associate, EDHEC Risk and Asset Management Research Centre

Pension planning in the United States has gained importance with the population aging and the growth of retirement accounts. In certain cases, the pension plan assets are several times larger than the value of the company itself (General Motors - Market cap: $19 billion, Pension plan assets: $67 billion, Estimated pension fund deficit: $25 billion - in December 31, 2002; see General Motors Corporation (2003)). Thus, pension investment decisions can have a sizeable impact on a company's long-term financial health. However, pension planning is rarely linked to general corporate planning systems since the domain falls outside traditional corporate budgeting and planning processes.

Type: Working paper
Date: le 04/04/2005
Research Cluster : Finance

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