Munich Personal RePEc Archive

VaR Limits for Pension Funds: An Evaluation

Berstein, Solange and Chumacero, Rómulo (2010): VaR Limits for Pension Funds: An Evaluation.

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Abstract

This paper evaluates the effects of imposing Value-at-Risk (VaR) limits and quantitative restrictions on portfolio choices in the context of a risk-based supervision framework for defined contribution pension funds. It shows the conditions under which VaR constraints are equivalent to constraints on volatility. The paper also presents some further considerations that regulators should take into account when adopting a risk-based supervision framework when contributions are mandatory and a significant part of the pension depends on the performance of past investments.

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