Optimal Asset Allocation Subject to Withdrawal Risk and Solvency Constraints

Areski Cousin (), Ying Jiao (), Christian Robert () and Olivier Zerbib ()
Additional contact information
Areski Cousin: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Ying Jiao: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, ISFA - Institut de Science Financière et d'Assurances
Christian Robert: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Olivier Zerbib: CREST - Center for Research in Extreme Scale Technologies [Bloomington] - Indiana University [Bloomington] - Indiana University System, IP Paris - Institut Polytechnique de Paris, ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris

Post-Print from HAL

Abstract: This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor's asset allocation.

Keywords: asset allocation asset-liability management withdrawal risk liquidity risk utility maximization; asset allocation; asset-liability management; withdrawal risk; liquidity risk; utility maximization (search for similar items in EconPapers)
Date: 2022-01-06
Note: View the original document on HAL open archive server: https://hal.science/hal-05415071v1
References: Add references at CitEc
Citations:

Published in Risks, 2022, ⟨10.3390/risks1010015⟩

Downloads: (external link)
https://hal.science/hal-05415071v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05415071

DOI: 10.3390/risks1010015

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().