Seminar 217, Risk Management: Mass Customisation versus Mass Production in Retirement Investment Management: Addressing a “Tough Engineering Problem"

Seminar | July 25 | 11 a.m.-1 p.m. | 1011 Evans Hall

 Speaker: Lionel Martellini, EDHEC-Risk Institute

 Center for Risk Management Research

Triggered by the introduction of ever stricter accounting and prudential pension fund regulations, a massive shift from defined-benefit to defined-contribution pension schemes is taking place across the world. As a result of this massive shift of retirement risks on individuals, the investment management industry is facing an increasing responsibility in terms of the need to provide households with suitable retirement solutions. Existing retirement products such as target date funds, annuities and variable annuities suffer from a number of shortcomings which make them ill-suited for investors saving for retirement in the accumulation phase of their life-cycle. In this paper, we describe how dynamic asset pricing theory and financial engineering can be used to design scalable mass-customised forms of retirement solutions that can address the specific retirement needs and constraints of a large number of individuals in a parsimonious manner.