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Open AccessFeature PaperArticle

Risk Management of Pension Fund: A Model for Salary Evolution

by Guglielmo D'Amico 1,*,†, Ada Lika 2,† and Filippo Petroni 3,†
Department of Pharmacy, University of G. D’Annunzio Chieti, 66100 Chieti, Italy
Department of Business, University of Cagliari, 09123, Cagliari, Italy
Department of Management, Marche Polytechnic University, 60121 Ancona, Italy
Author to whom correspondence should be addressed.
These authors contributed equally to this work.
Int. J. Financial Stud. 2019, 7(3), 44;
Received: 26 June 2019 / Revised: 10 August 2019 / Accepted: 13 August 2019 / Published: 20 August 2019
In this paper, we propose a semi-Markov chain to model the salary levels of participants in
a pension scheme. The aim of the models is to understand the evolution in time of the salary of active
workers in order to implement it in the construction of the actuarial technical balance sheet. It is
worth mentioning that the level of the contributions in a pension scheme is directly proportional to
the incomes of the active workers; in almost all cases, it is a percentage of the worker’s incomes. As a
consequence, an adequate modeling of the salary evolution is essential for the determination of the
contributions paid to the fund and thus for the determination of the fund’s sustainability, especially
currently, when all jobs and salaries are subject to changes due to digitalization, ICT, innovation, etc.
The model is applied to a large dataset of a real compulsory Italian pension scheme of the first pillar.
The semi-Markovian hypothesis is tested, and the advantages with respect to Markov chain models
are assessed. View Full-Text
Keywords: Markov chain; salary lines; reward process Markov chain; salary lines; reward process
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D'Amico, G.; Lika, A.; Petroni, F. Risk Management of Pension Fund: A Model for Salary Evolution. Int. J. Financial Stud. 2019, 7, 44.

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