Pensions and Retirement Training Course on Stochastic Modelling in Pensions

Module 1: Introduction to Stochastic Modelling in Pensions
Definition and purpose of stochastic modeling
Comparison with deterministic models
Applications in pension risk assessment and decision-making
Case study: Benefits of stochastic modeling in real pension plans

Module 2: Probability and Statistical Foundations
Key probability concepts for pensions (random variables, distributions)
Statistical techniques for modeling uncertainties
Understanding correlation, variance, and covariance
Exercise: Applying probability distributions to pension scenarios

Module 3: Modeling Investment Risk
Modeling asset returns and market volatility
Monte Carlo simulation for investment performance
Portfolio risk assessment under stochastic frameworks
Practical exercise: Simulating portfolio returns and asset-liability outcomes

Module 4: Modeling Longevity and Mortality Risk
Probabilistic modeling of mortality and longevity
Incorporating stochastic assumptions into pension liabilities
Scenario analysis for demographic risk
Exercise: Simulating liability outcomes under varying longevity scenarios

Module 5: Scenario Analysis and Stress Testing
Developing stochastic scenarios for interest rates, inflation, and market shocks
Sensitivity analysis of pension liabilities and funding strategies
Workshop: Creating multiple stochastic scenarios for a pension plan

Module 6: Actuarial Applications of Stochastic Models
Incorporating stochastic assumptions in DB and DC valuations
Assessing funding levels and surplus/deficit probabilities
Stochastic projections for contribution planning and benefit design
Case study: Actuarial decisions based on stochastic outputs

Module 7: Risk Management and Mitigation Strategies
Using stochastic models for hedging and risk transfer
Identifying probabilistic risk measures (VaR, CVaR)
Designing robust funding and investment strategies under uncertainty
Exercise: Risk mitigation planning using stochastic outputs

Module 8: Software Tools and Implementation
Overview of actuarial and financial modeling software
Setting up simulations and running stochastic models
Data input, validation, and interpretation of outputs
Practical exercise: Building a simple stochastic model using software

Module 9: Reporting and Communication of Results
Presenting stochastic outcomes to trustees and stakeholders
Explaining probability distributions, confidence intervals, and risk measures
Visualizing results for decision-making
Group exercise: Drafting a stochastic modeling report for a pension fund

Module 10: Case Studies and Practical Applications
Real-world applications of stochastic modeling in pensions
Group simulation: Complete stochastic valuation, scenario analysis, and risk assessment
Lessons learned and best practices
Developing actionable recommendations for pension fund sustainability
Final discussion, review, and certification