Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5089887 | Journal of Banking & Finance | 2011 | 11 Pages |
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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Robert Ferstl, Alex Weissensteiner,