Stochastic control of funding systems

This paper is concerned with funding systems, i.e. systems which accumulate funds for the future payment of financial obligations. Commonly, such funding requires a balance between (1) the desire to minimise the contributions that need to be diverted from other use to the support of the Fund, and (2) the need to maintain reasonable solvency in the Fund. unding is discussed here in a general framework. Applications are numerous. The specific applications mentioned in the paper are:• d benefit retirement funding, nance of a prudential margin by a non-life insurer, nd payment strategy. per applies stochastic optimal control theory to determine how rates of contribution to the Fund and allocation of its assets by asset sector should respond to changing solvency. These results are obtainable from a particular differential equation, which may be solved numerically. Detailed numerical examples are provided.