Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
978722 | Physica A: Statistical Mechanics and its Applications | 2006 | 13 Pages |
Abstract
Functional integrals constitute a powerful tool in the investigation of financial models. In the recent econophysics literature, this technique was successfully used for the pricing of a number of derivative securities. In the present contribution, we introduce this approach to the field of asset-liability management. We work with a representation of cash flows by means of a two-dimensional delta-function perturbation, in the case of a Brownian model and a geometric Brownian model. We derive closed-form solutions for a finite horizon ALM policy. The results are numerically and graphically illustrated.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
Marc Decamps, Ann De Schepper, Marc Goovaerts,