An Asset and Liability Management System for Towers Perrin-Tillinghast

John M. Mulvey, Gordon Gould and Clive Morgan
Additional contact information
John M. Mulvey: Department of Operations Research and Financial Engineering, and Bendheim Center for Finance, Princeton University, Princeton, New Jersey 08544
Gordon Gould: Towers Perrin, 1515 Arapahoe Street, Denver, Colorado 80202-2123
Clive Morgan: Towers Perrin, 175 Bloor Street, South Tower, Suite 1501, Toronto, Ontario M4W 3T6, Canada

Interfaces, 2000, vol. 30, issue 1, 96-114

Abstract: Towers Perrin-Tillinghast employs a stochastic asset-and-liability management system for helping its pension plan and insurance clients understand the risks and opportunities related to capital market investments and other major decisions. The system has three major components: (1) a stochastic scenario generator (CAP:Link); (2) a nonlinear optimization simulation model (OPT:Link); and (3) a flexible liability- and financial-reporting module (FIN:Link). Each part improves over existing technology as compared with traditional actuarial approaches. The integrated investment system links asset risks to liabilities so that company goals are best achieved. For example, US WEST saved $450 to $1,000 million in opportunity costs in its pension plan by following the advice of the asset-and-liability system.

Keywords: FINANCE—INVESTMENT; FINANCIAL INSTITUTIONS—INSURANCE (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (19)

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