PORTFOLIO INSURANCE STRATEGIES FOR A TARGET ANNUITIZATION FUND

The transition from defined benefit to defined contribution (DC) pension schemes has increased the interest in target annuitization funds that aim to fund a minimum level of retirement income. Prior literature has studied the optimal investment strategies for DC funds that provide minimum guarantees, but far less attention has been given to portfolio insurance strategies for DC pension funds focusing on retirement income targets. We evaluate the performance of option-based and constant proportion portfolio insurance strategies for a DC fund that targets a minimum level of inflation-protected annuity income at retirement. We show how the portfolio allocation to an equity fund varies depending on the member’s age upon joining the fund, displaying a downward trend through time for members joining the fund before ages in the mid-30s. We demonstrate how both portfolio insurance strategies provide strong protection against downside equity risk in financing a minimum level of retirement income. The option-based strategy generally leads to higher accumulated savings at retirement, whereas the constant proportion strategy provides better downside risk protection robust to equity market jumps/volatilities.

MULTIPLIER OPTIMIZATION FOR CONSTANT PROPORTION PORTFOLIO INSURANCE (CPPI) STRATEGY

Constant proportion portfolio insurance (CPPI) strategy is a very popular investment solution which provides an investor with a capital protection as well as allows for an equity market participation. In this paper, we propose a two-step approach to the numerical optimization of the CPPI main parameter, multiplier. First, we identify an admissible range of the multiplier values by controlling the shortfall probability (chosen as a measure of the gap risk). Second, within the admissible range, we choose the optimal multiplier value with respect to the omega ratio (chosen as a performance measure). We illustrate the performance of our optimization algorithm on simulated CPPI paths in the Black–Scholes environment with discrete trading as well as on the historical S&P500 data using the block-bootstrap simulations.

Effects of abomasally infused amylase and increasing amounts of corn starch on fecal excretion of starch, total and microbial nitrogen, and volatile fatty acids in heifers1

The aim of the present study was to study the effect of exogenous amylase on postruminal disappearance of increasing amounts of corn starch being infused into the abomasum of heifers, and to detect a possible limitation of starch digestion in the small intestine. Four rumen-fistulated heifers (2 German Black Pied and 2 Jersey × German Black Pied) with an initial BW of 565 ± 6 kg were fed 5.6 kg DM/d of a diet targeted to contain only a negligible amount of starch. Animals were assigned randomly to a crossover trial with 2 experimental periods lasting 35 d each with 10 d of diet adaption followed by 25 d of sample collection. During the sampling period, each animal was abomasally infused with native corn starch at 5 levels (953, 1,213, 1,425, 1,733, and 1,993 g DM/d) each for a 5-d period with and without exogenous amylase, respectively. At days 6 to 10 the heifers received an abomasal infusion of starch in amounts of 724 g/d. Feces were sampled 4 times a day during the collection periods. Titanium dioxide was ruminally administered (10 g/d) to estimate fecal excretion. Purine bases in feces were determined and used as a marker for microbial N excretion. Fecal excretion of microbial N increased linearly with increasing level of starch infusion (P < 0.001), indicating a constant proportion of the infused starch being fermented in the hindgut. In contrast, the apparent digestibility of starch from the total postruminal tract decreased linearly from 90% to 80% (P < 0.001) when the intestinal starch supply increased from 1 to 2 kg/d. There is strong evidence based on the increasing starch excretion with feces and the indication of a constant proportion of infused starch being fermented in the hindgut for a decreasing efficiency of starch digestion in the small intestine with increasing intestinal supply. Amylase administration increased fecal excretion of butyrate (P = 0.04) and tended to increase isovalerate excretion (P = 0.06). However, amylase did not affect fecal excretion of microbial N or starch, suggesting that pancreatic amylase activity may not be the primarily limiting factor of postruminal starch digestion in heifers when corn starch is abomasally infused in amounts up to 2 kg/d.