Ming-Chin Hung

To ensure the success of a pension plan under a self-contained defined contribution (DC) retirement plan, the inclusion of foreign assets in a local pension portfolio could be beneficial for risk diversification and the efficient improvement of a fund’s investment performance during its accumulation phase. This study focuses on developing international asset allocation criteria for a DC pension plan; accordingly, we consider risk exposure relative to stochastic interest rates and ex- change rates with minimum guarantees. An arbitrage-free framework, namely, the cross-currency Heath–Jarrow–Morton interest rate model, is introduced in dynamic optimization programming for the DC pension fund. The proposed solution based on the generalized stochastic framework provides tractable and appropriate criteria for the dynamic allocation of a DC pension fund. The constituents of the optimal solution can reflect changes in investment lifecycles and shifts in risk preferences during the accumulation phase of a DC pension plan.

The COVID-19 outbreak has had considerably harsh impacts on the global economy, such as shutting down and paralyzing industrial production capacity and increasing the unemployment rate. For enterprises, relying on past experiences and strategies to respond to such an unforeseen financial crisis is not appropriate or sufficient. Thus, there is an urgent requirement to reexamine and revise an enterprise’s inherent crisis management architecture so as to help it recover sooner after having encountered extremely negative economic effects. To fulfill this need, the present paper introduces a fusion architecture that integrates artificial intelligence and multiple criteria decision making to exploit essential risk factors and identify the intertwined relations between dimensions/criteria for managers to prioritize improvement plans and deploy resources to key areas without any waste. The result indicated the accurate improvement priorities, which ran in the order of financial sustainability (A), customer and stakeholders (B), enablers’ learning and growth (D), and internal business process (C) based on the measurement of the impact. The method herein will help to effectively and efficiently support crisis management for an organization confronting COVID-19. Among all the criteria, maintaining fixed reserves was the most successful factor regarding crisis management.

Probability of default (PD) estimation is essential to the calculation of expected credit loss under the Basel III framework and the International Financial Reporting Standard 9. Gross domestic product (GDP) growth has been adopted as a key determinant in PD estimation models. However, PD models with a GDP covariate may not perform well under aberrant (i.e., outlier) conditions such as the COVID-19 pandemic. This study explored the robustness of a PD model with a GDP determinant (the test model) in comparison with that of a PD model with a credit default swap index (CDX) determinant (the alternative model). The test model had a significantly greater ratio of increase in Akaike information criterion than the alternative model in comparisons of the fit performance of models including 2020 data with that of models excluding 2020 data (i.e., that do not cover the COVID-19 pandemic). Furthermore, the Cook’s distance of the 2020 data of the test model was significantly greater than that of the alternative model. Therefore, the test model exhibited a serious robustness issue in outlier scenarios, such as the COVID-19 pandemic, whereas the alternative model was more robust. This finding opens the prospect for the CDX to potentially serve as an alternative to GDP in PD estimation models.

Under the ravages of COVID-19, global supply chains have encountered unprecedented disruptions. Past experiences cannot fully explain the situations nor provide any suitable responses to these fatal shocks on supply chain management (SCM), especially in todays’ highly intertwined/globalized business environment. This research thus revisits and rechecks the crucial components for global SCM during such special periods, and the basic essence of such management covers numerous perspectives that can be categorized into a multiple criteria decision making (MCDM) approach. To handle this complex issue appropriately, one can introduce a fusion intelligent system that involves data envelopment analysis (DEA), rough set theory (RST), and MCDM to understand the reality of the analyzed problem in a faster and better manner. Based on the empirical results, we rank the priorities in order as cash management and information (D), raw material supply (B), global management strategy (C), and productivity and logistics (A) for improvement in SCM. This finding is confirmed by companies now undergoing a downsizing strategy in order to survive in this harsh business environment.

To reduce the complexity of fair spread computation in consideration of random loss given default, an analytical approximation method for collateralized debt obligation (CDO) pricing in one-factor model is proposed by modifying the approximation of portfolio loss distribution of (O. Vasicek, 1991). By comparing the results obtained by the proposed method with the approximation of CDO pricing based on the extended Vasicek model (O. Vasicek, 1991) and one of the analytical methods of (J. Hull and A. White, 2004), it is found that the analytical approximation method proposed in this article produces satisfactory results under large number of assets.