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Risk Management Issues for Mandatory Private Retirement Provision: Roles for Options
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Hazel Bateman
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Abstract
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Following the introduction of mandatory superannuation provision in Australia,
superannuation fund managers and trustees are faced with the conflicting objectives
of high returns and minimal year-on-year volatility. This paper investigates
whether repeat portfolio insurance implemented over the working life time of
superannuation saving can offer a solution. Stochastic simulations show that the
options-based strategies perform well in comparison to traditional investment
practices. Strategies combining protective puts with age phasing produce the
most appealing results.
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Keywords
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REPEAT PORTFOLIO INSURANCE; DEFINED CONTRIBUTIONS SUPERANNUATION.
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Contact Details
Hazel Bateman
School of Economics
The University of New South Wales
Sydney NSW 2052
Email: h.bateman.unsw.edu.au
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An earlier version of this paper was presented at the PhD Conference in
Economics and Business at the Australian National University, 8-9
December, 1994. Many thanks to Geoffrey Kingston, John Piggott, Robert
Officer and two anonymous referees for their helpful comments. Financial
support under ARC Grant A79331125 is gratefully acknowledged.
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