IDEAS home Printed from https://ideas.repec.org/a/cup/bracjl/v9y2003i01p137-195_00.html
   My bibliography  Save this article

Global Asset Liability Management

Author

Listed:
  • Dempster, M. A. H.
  • Germano, M.
  • Medova, E. A.
  • Villaverde, M.

Abstract

Dynamic financial analysis (DFA) is a technique which uses Monte Carlo simulation to investigate the evolution over time of financial models of funds, complex liabilities and entire firms. Although of increasing popularity, the drawback of DFA is the dearth of systematic methods for optimising model parameters for strategic financial planning. This paper introduces strategic DFA which employs the only recently mature technology of dynamic stochastic optimisation to fill this gap. The new approach is described in terms of an illustrative case study of a joint university/industry project to create a decision support system for strategic asset liability management involving global asset classes and defined contribution pension plans. Although the application of the system described in the paper is to fund design and risk management, the approach and techniques described here are much more broadly applicable to strategic financial planning problems; for example, to insurance and reinsurance firms, to risk capital allocation in financial institutions and trading firms and to corporate investment and business development involving real options. As well as describing the mathematical and statistical models used in the case study, the paper treats econometric estimation, asset return and liability scenario generation, model specification and optimisation, system evaluation and historical backtesting. Throughout the system visualisation plays an important role.

Suggested Citation

  • Dempster, M. A. H. & Germano, M. & Medova, E. A. & Villaverde, M., 2003. "Global Asset Liability Management," British Actuarial Journal, Cambridge University Press, vol. 9(1), pages 137-195, April.
    • Handle: RePEc:cup:bracjl:v:9:y:2003:i:01:p:137-195_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1357321700004153/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maram Alwohaibi & Diana Roman, 2018. "ALM models based on second order stochastic dominance," Computational Management Science, Springer, vol. 15(2), pages 187-211, June.
    2. Konicz, Agnieszka Karolina & Mulvey, John M., 2015. "Optimal savings management for individuals with defined contribution pension plans," European Journal of Operational Research, Elsevier, vol. 243(1), pages 233-247.
    3. Abaffy, J. & Bertocchi, M. & Dupacova, J. & Moriggia, V. & Consigli, G., 2007. "Pricing nondiversifiable credit risk in the corporate Eurobond market," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2233-2263, August.
    4. Giorgio Consigli & Vittorio Moriggia & Sebastiano Vitali & Lorenzo Mercuri, 2018. "Optimal insurance portfolios risk-adjusted performance through dynamic stochastic programming," Computational Management Science, Springer, vol. 15(3), pages 599-632, October.
    5. Evstigneev, Igor V. & Hens, Thorsten & Schenk-Hoppé, Klaus Reiner, 2008. "Globally evolutionarily stable portfolio rules," Journal of Economic Theory, Elsevier, vol. 140(1), pages 197-228, May.
    6. Robert Ferstl & Alexander Weissensteiner, 2011. "Backtesting Short-Term Treasury Management Strategies Based on Multi-Stage Stochastic Programming," Palgrave Macmillan Books, in: Gautam Mitra & Katharina Schwaiger (ed.), Asset and Liability Management Handbook, chapter 19, pages 469-494, Palgrave Macmillan.
    7. Ferstl, Robert & Weissensteiner, Alex, 2011. "Asset-liability management under time-varying investment opportunities," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 182-192, January.
    8. Alois Geyer & Michael Hanke & Alex Weissensteiner, 2009. "A stochastic programming approach for multi-period portfolio optimization," Computational Management Science, Springer, vol. 6(2), pages 187-208, May.
    9. Igor Evstigneev & Dhruv Kapoor, 2009. "Arbitrage in stationary markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 32(1), pages 5-12, May.
    10. Gallardo-Vázquez, Dolores & Sánchez-Hernández, María Isabel & Corchuelo-Martinez-Azua, María Beatriz, 2013. "Validación de un instrumento de medida para la relación entre la orientación a la responsabilidad social corporativa y otras variables estratégicas de la empresa," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 16(1), pages 11-23.
    11. Christopher Bayliss & Marti Serra & Armando Nieto & Angel A. Juan, 2020. "Combining a Matheuristic with Simulation for Risk Management of Stochastic Assets and Liabilities," Risks, MDPI, vol. 8(4), pages 1-14, December.
    12. Sebastiano Vitali & Vittorio Moriggia, 2021. "Pension fund management with investment certificates and stochastic dominance," Annals of Operations Research, Springer, vol. 299(1), pages 273-292, April.
    13. Waitzkin, Howard & Jasso-Aguilar, Rebeca & Landwehr, Angela & Mountain, Carolyn, 2005. "Global trade, public health, and health services: Stakeholders' constructions of the key issues," Social Science & Medicine, Elsevier, vol. 61(5), pages 893-906, September.
    14. Parisa Rafiaani & Zoumpolia Dikopoulou & Miet Dael & Tom Kuppens & Hossein Azadi & Philippe Lebailly & Steven Passel, 2020. "Identifying Social Indicators for Sustainability Assessment of CCU Technologies: A Modified Multi-criteria Decision Making," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(1), pages 15-44, January.
    15. Das, Sanjiv R. & Ostrov, Daniel & Radhakrishnan, Anand & Srivastav, Deep, 2022. "Dynamic optimization for multi-goals wealth management," Journal of Banking & Finance, Elsevier, vol. 140(C).
    16. Gerber, Anke & Hens, Thorsten & Woehrmann, Peter, 2005. "Dynamic General Equilibrium and T-Period Fund Separation," Discussion Papers 2005/16, Norwegian School of Economics, Department of Business and Management Science.
    17. Adam Sȩdziwy, 2015. "Sustainable Street Lighting Design Supported by Hypergraph-Based Computational Model," Sustainability, MDPI, vol. 8(1), pages 1-13, December.
    18. Jitka Dupačová & Jan Polívka, 2009. "Asset-liability management for Czech pension funds using stochastic programming," Annals of Operations Research, Springer, vol. 165(1), pages 5-28, January.
    19. Sergio, Bianchi & Alessandro, Trudda, 2008. "Global Asset Return in Pension Funds: a dynamical risk analysis," MPRA Paper 12011, University Library of Munich, Germany, revised 14 Jun 2008.
    20. Moriggia, Vittorio & Kopa, Miloš & Vitali, Sebastiano, 2019. "Pension fund management with hedging derivatives, stochastic dominance and nodal contamination," Omega, Elsevier, vol. 87(C), pages 127-141.
    21. Andersson Fredrik O., 2018. "Necessity Nonprofit Entrepreneurship: A Study of Extrinsically Motivated Nascent Nonprofit Entrepreneurs," Nonprofit Policy Forum, De Gruyter, vol. 9(2), pages 1-12, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:bracjl:v:9:y:2003:i:01:p:137-195_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/baj .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.