Asset allocation strategies in the presence of liability constraints

Areski Cousin, Ying Jiao, Christian Y. Robert and Olivier Zerbib

Insurance: Mathematics and Economics, 2016, vol. 70, issue C, 327-338

Abstract: The performance of portfolio managers is usually assessed by comparing their allocation strategies to a benchmark portfolio. A major issue for portfolio managers of liability driven institutions is that no benchmark is given to them, although they face mid-term objectives with short term constraints. No performance attribution methodology may then be used to serve as a reference. Assessing the performance of the asset manager as an agent, represents a major stake for the institution as a principal delegating a mandate of asset management. We propose an optimal asset allocation approach taking into account liability constraints to build a benchmark. This benchmark will be used to compare the ex-post effective performance of the asset manager to the effective performance of the ex-ante optimal dynamic asset allocation.

Keywords: Optimal allocation; Asset-liability management; Benchmarking; Performance analysis; Credit risk (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Working Paper: Asset allocation strategies in the presence of liability constraints (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:70:y:2016:i:c:p:327-338

DOI: 10.1016/j.insmatheco.2016.06.020

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