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Efficient Portfolios in the Asset Liability Context

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  • Keel, Alex
  • Müller, Heinz H.

Abstract

The set of efficient portfolios in an asset liability model is discussed in detail. The occurence of liabilities leads to a parallel shift of the efficient set. Under an appropriate assumption, the shift vector can be decomposed in different components. For the special case, where the investor is a pension fund, it is shown how shortfall constraints can be reconciled with efficiency. Finally, optimality conditions for the market portfolio are derived.

Suggested Citation

  • Keel, Alex & Müller, Heinz H., 1995. "Efficient Portfolios in the Asset Liability Context," ASTIN Bulletin, Cambridge University Press, vol. 25(1), pages 33-48, May.
    • Handle: RePEc:cup:astinb:v:25:y:1995:i:01:p:33-48_00
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    Cited by:

    1. Bob Korkie & Harry J. Turtle, 2002. "A Mean-Variance Analysis of Self-Financing Portfolios," Management Science, INFORMS, vol. 48(3), pages 427-443, March.
    2. Jian Pan & Qingxian Xiao, 2017. "Optimal mean–variance asset-liability management with stochastic interest rates and inflation risks," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 85(3), pages 491-519, June.
    3. Leippold, Markus & Trojani, Fabio & Vanini, Paolo, 2004. "A geometric approach to multiperiod mean variance optimization of assets and liabilities," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1079-1113, March.
    4. Spyridon D Vrontos & Ioannis D Vrontos & Loukia Meligkotsidou, 2013. "Asset-liability management for pension funds in a time-varying volatility environment," Journal of Asset Management, Palgrave Macmillan, vol. 14(5), pages 306-333, October.
    5. Wei, J. & Wong, K.C. & Yam, S.C.P. & Yung, S.P., 2013. "Markowitz’s mean–variance asset–liability management with regime switching: A time-consistent approach," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 281-291.
    6. Mei Choi Chiu & Hoi Ying Wong & Duan Li, 2012. "Roy’s Safety‐First Portfolio Principle in Financial Risk Management of Disastrous Events," Risk Analysis, John Wiley & Sons, vol. 32(11), pages 1856-1872, November.
    7. Thomson, Robert J., 2005. "The pricing of liabilities in an incomplete market using dynamic mean-variance hedging," Insurance: Mathematics and Economics, Elsevier, vol. 36(3), pages 441-455, June.
    8. He, Lin & Liang, Zongxia & Yuan, Fengyi, 2020. "Optimal DB-PAYGO pension management towards a habitual contribution rate," Insurance: Mathematics and Economics, Elsevier, vol. 94(C), pages 125-141.
    9. Lu Yang & Chengke Zhang & Huainian Zhu, 2022. "Robust Stochastic Stackelberg Differential Reinsurance and Investment Games for an Insurer and a Reinsurer with Delay," Methodology and Computing in Applied Probability, Springer, vol. 24(1), pages 361-384, March.
    10. Eckhard Platen, 2009. "Real World Pricing of Long Term Contracts," Research Paper Series 262, Quantitative Finance Research Centre, University of Technology, Sydney.
    11. Kevin Fergusson & Eckhard Platen, 2017. "Less-Expensive Valuation of Long Term Annuities Linked to Mortality, Cash and Equity," Papers 1711.02808, arXiv.org.
    12. Devolder, Pierre & Bosch Princep, Manuela & Dominguez Fabian, Inmaculada, 2003. "Stochastic optimal control of annuity contracts," Insurance: Mathematics and Economics, Elsevier, vol. 33(2), pages 227-238, October.
    13. M. C. Chiu & D. Li, 2009. "Asset-Liability Management Under the Safety-First Principle," Journal of Optimization Theory and Applications, Springer, vol. 143(3), pages 455-478, December.
    14. Xie, Shuxiang & Li, Zhongfei & Wang, Shouyang, 2008. "Continuous-time portfolio selection with liability: Mean-variance model and stochastic LQ approach," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 943-953, June.
    15. Wei, Jiaqin & Wang, Tianxiao, 2017. "Time-consistent mean–variance asset–liability management with random coefficients," Insurance: Mathematics and Economics, Elsevier, vol. 77(C), pages 84-96.
    16. Baumann, Roger T. & Müller, Heinz H., 2008. "Pension funds as institutions for intertemporal risk transfer," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1000-1012, June.

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