Research On Capital Allocation By Percentile Layer Based On Defined Benefit Pension Related Risk Measure

Pension plan is a kind of social security system to protect the workers to maintain a basic standard of living after retirement.The pension plan consists of two basic forms,Defined benefit(DB)and Defined contribution(DC).The difference is that the amount of the pension received by the participants in the defined benefit pension plan is fixed,and the amount of the pension received by the participants in the defined contribution pension plan depends on the investment income of the pension plan.In order to maintain the safe and effective operation of the pension plan,and achieve the goal of maintaining and increasing the value of the pension plan,the pension plan must carry out various investment activities.Therefore,it is necessary to carry out effective risk management for the pension plan in order to ensure the safety of the pension plan.The capital of the pension plan represents the pension plan’s ability to resist risks and is the guarantee of continuous operation of the pension plan.The concept of capital management is to manage the source and purpose of the capital of the pension plan.Capital management is an advanced means of risk management,which integrates risk with capital scientifically.Capital allocation is an important method for capital management and risk management.Reasonable capital allocation can effectively mitigate the risk of investment.Because of the importance of capital allocation in capital management and risk management,capital allocation methods are also increasing.Different from the traditional capital allocation method,the capital allocation method by percentile layer will not pay too much attention to the tail risk,which allocates capital for all losses based on conditional exceedance probability.Capital allocation method by percentile layer is a comprehensive and effective capital allocation method.This thesis first introduced the concept of DB pension plan and the risk of the investment of DB pension plan.Then,the thesis introduced the concept of percentile layer and capital allocation method by percentile layer.According to the problem that VaR of capital allocation model by percentile layer cannot measure tail risk of risk events sufficiently,we used the CVaR to measure the loss more than VaR,to achieve a comprehensive measure of risk and construct capital allocation method by percentile layer under the CVaR.Based on the Pareto distribution,the VaR and CVaR formulas for the distribution of loss distribution obeys Pareto distribution were obtained.Combined with statistical data,using statistical analysis software Eviews8.0 and Matlab2014b and R,the specific example was used to verify the practicability of the model.Furthermore,this thesis used the extreme value POT model to fit the risk distribution of extreme events,and the problem of capital allocation by percentile layer of extreme event risk was studied under CVaR.The Bootstrap method was used to compensate for the defects of the tail estimation data,and then the amount of the risk capital allocation was obtained through capital allocation model by percentile layer.An example analysis was given.At the end of the article,we summarized the research contents of this thesis,and prospected the next step of the research combined under the research results.