Asset-liability management under time-varying investment opportunities

Robert Ferstl and Alex Weissensteiner

Journal of Banking & Finance, 2011, vol. 35, issue 1, 182-192

Abstract: Stochastic linear programming is a suitable numerical approach for solving practical asset-liability management problems. In this paper, we consider a multi-stage setting under time-varying investment opportunities and propose a decomposition of the benefits in dynamic re-allocation and predictability effects. We use a first-order unrestricted vector autoregressive process to model asset returns and state variables and include, in addition to equity returns and dividend-price ratios, Nelson/Siegel parameters to account for the evolution of the yield curve. The objective is to minimize the Conditional Value at Risk of shareholder value, i.e., the difference between the mark-to-market value of (financial) assets and the present value of future liabilities.

Keywords: Asset-liability; management; Predictability; Stochastic; programming; Scenario; generation; VAR; process (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (27)

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Working Paper: Asset-Liability Management under time-varying Investment Opportunities (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:1:p:182-192

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