Journal of Banking & Finance Vol. 35 No. 1 2011
Asset-liability management under time-varying investment opportunities
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.
- DOI
- 10.1016/j.jbankfin.2010.07.028
- Volume
- 35
- Issue
- 1
- Pages
- 182-192
- Language
- en
- Sources
- openalex openalex crossref bibtex:phds-export.bib