Dynamic Management of Interest Rate Risk for Central Banks and Pension Funds

Arjan B. Berkelaar and Gabriel Petre

Chapter 4 in Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010, pp 64-89 from Palgrave Macmillan

Abstract: Abstract The strategic asset allocation decision for any investor sets out the portfolio with the highest expected return given investors’ overall objectives, investment horizon and risk tolerance. The objective of the strategic asset allocation study is a policy benchmark. This benchmark is typically timeinvariant and represents the ‘neutral’ position against which risk and return are measured. Given that typically over 90% of the risk of investment portfolios is derived from the policy benchmark, a great deal of effort goes into the process of creating it. In most instances, this benchmark is reviewed periodically, often on a three to five year timetable.

Keywords: Interest Rate; Central Bank; Pension Fund; Excess Return; Asset Allocation (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-25129-8_4

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DOI: 10.1057/9780230251298_4

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