The Russell-Yasuda Kasai Model: An Asset/Liability Model for a Japanese Insurance Company Using Multistage Stochastic Programming

David R. Cariño, Terry Kent, David H. Myers, Celine Stacy, Mike Sylvanus, Andrew L. Turner, Kouji Watanabe and William T. Ziemba
Additional contact information
David R. Cariño: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
Terry Kent: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
David H. Myers: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
Celine Stacy: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
Mike Sylvanus: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
Andrew L. Turner: Frank Russell Company, 909 A Street, Tacoma, Washington 98402
Kouji Watanabe: The Yasuda Fire and Marine Insurance Co., Ltd., Shinjuku-ku, Tokyo 160 Japan
William T. Ziemba: The University of British Columbia, Vancouver, British Columbia V6T 1Y8, Canada

Interfaces, 1994, vol. 24, issue 1, 29-49

Abstract: Frank Russell Company and The Yasuda Fire and Marine Insurance Co., Ltd., developed an asset/liability management model using multistage stochastic programming. It determines an optimal investment strategy that incorporates a multiperiod approach and enables the decision makers to define risks in tangible operational terms. It also handles the complex regulations imposed by Japanese insurance laws and practices. The most important goal is to produce a high-income return to pay annual interest on savings-type insurance policies without sacrificing the goal of maximizing the long-term wealth of the firm. During the first two years of use, fiscal 1991 and 1992, the investment strategy devised by the model yielded extra income of 42 basis points (¥8.7 billion or US$79 million).

Keywords: financial institutions: insurance; programming: stochastic (search for similar items in EconPapers)
Date: 1994
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Citations: View citations in EconPapers (67)

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