Pension fund ALM models with stochastic dominance

The main goal of a pension fund manager is sustainability. We propose an Asset and Liability Management (ALM) model structured as a multi-stage stochastic programming problem adopting a discrete scenario tree and a multi-objective function. Among other constraints, we consider the second order stochastic dominance with respect to a market portfolio and we compare the results with the expected value constraint and the standard approach. Numerical results show that we can efficiently manage the pension fund satisfying liquidity, return, sponsor's extraordinary contribution and funding gap targets.