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@article{ART001995135},
author={Do Young Cheong and Sung Jooho},
title={Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea},
journal={Journal of Insurance and Finance},
issn={2384-3209},
year={2015},
volume={26},
number={2},
pages={3-32}

TY - JOUR
AU - Do Young Cheong
AU - Sung Jooho
TI - Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea
JO - Journal of Insurance and Finance
PY - 2015
VL - 26
IS - 2
PB - Korea Insurance Research Institute
SP - 3
EP - 32
SN - 2384-3209
AB - As of today, changes in international accounting standards on employee benefits and also financial market instability lead to a growing interest in Asset-Liability Management(ALM) in particular, in the field of occupational Defined Benefit(DB) funds. However, DB funds in Korea have been mostly invested in interest guaranteed products (such as deposits), not considering the efficiency of ALM. In order to examine the current investment behaviors of DB funds in Korea, We drive out maximum Sharpe ratio portfolio and Liability Driven Investment(LDI) portfolios, which are consist of liability matching portfolio and return seeking portfolio. We find out that deposit-oriented maximum Sharpe ratio portfolio is too inefficient to employ in ALM framework. LDI portfolio that is, matching portfolio and return seeking portfolio each would be likely to be a recommendable investment strategy, which is empirically verified. We also find that leverage could make LDI strategy more efficiently. However the leverage ratio have to be decided considering the expected return, the leverage cost, the funded ratio and the minimum funded ratio requirement. Consequently, we hope that this paper could provide a momentum changing the current investment behaviour in Korea. It’s also expected to contribute to prepare Investment Policy Statement(IPS) which will be phased in from 2016.
KW - Surplus Optimization;Defined Benefit(DB) Pension Plan;Liability Driven Investment(LDI);Leverage;Investment Policy Statement(IPS)
DO -
UR -
ER -

Do Young Cheong and Sung Jooho. (2015). Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea. Journal of Insurance and Finance, 26(2), 3-32.

Do Young Cheong and Sung Jooho. 2015, "Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea", Journal of Insurance and Finance, vol.26, no.2 pp.3-32.

Do Young Cheong, Sung Jooho "Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea" Journal of Insurance and Finance 26.2 pp.3-32 (2015) : 3.

Do Young Cheong, Sung Jooho. Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea. 2015; 26(2), 3-32.

Do Young Cheong and Sung Jooho. "Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea" Journal of Insurance and Finance 26, no.2 (2015) : 3-32.

Do Young Cheong; Sung Jooho. Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea. Journal of Insurance and Finance, 26(2), 3-32.

Do Young Cheong; Sung Jooho. Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea. Journal of Insurance and Finance. 2015; 26(2) 3-32.

Do Young Cheong, Sung Jooho. Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea. 2015; 26(2), 3-32.

Do Young Cheong and Sung Jooho. "Levered Liability Driven Investment Strategy for Occupational Defined Benefit Pension Plans in Korea" Journal of Insurance and Finance 26, no.2 (2015) : 3-32.