Solvency indicators for partially unfunded pension funds

This study addresses the issue of the management of a partially unfunded pension fund in a stochastic framework. In
particular it focuses on the sustainability of a pay-as-you-go pension fund with a funded component. The model proposed
is developed in a continuous time and the two stochastic variables are the return on the assets and the intensity of
new entrants. The former are driven by a Vasiceck process and the latter is modelled by a mean reverting process. The
goal is to monitor the solvency of the fund, namely its capability to pay future obligations. To check the financial stability
of the fund, risk indicators are proposed.
The methodology is applied to the pension fund of Italian Professional Orders, pension funds that follow a not pure
pay-as-you-go pension scheme, but have a funded component.
Finally, some examples illustrate how the management of the fund can activate the correctives to rebalance the fund
solvency.