Dynamic asset allocation with liabilities
Dynamic asset allocation with liabilities
We develop an analytical solution to the dynamic multi-period portfolio choice problem of an investor with risky liabilities and time varying investment opportunities. We use the model to compare the asset allocation of investors who take liabilities into account, assuming time varying returns and a multi-period setting with the asset allocation of myopic ALM investors. In the absence of regulatory constraints on asset allocation weights, there are significant gains to investors who have access to a dynamic asset allocation model with liabilities. The gains are smaller under the typical funding ratio constraints faced by pension funds.
254–291
Giamouridis, Daniel
38194c8a-459d-4dc8-b866-45af6e69b238
Sakkas, Athanasios
5a69d77a-fcea-4e07-bc18-5a8934a4899b
Tessaromatis, Nikolaos
151e1ba8-07cb-4d71-ad33-8dc320df6183
1 March 2017
Giamouridis, Daniel
38194c8a-459d-4dc8-b866-45af6e69b238
Sakkas, Athanasios
5a69d77a-fcea-4e07-bc18-5a8934a4899b
Tessaromatis, Nikolaos
151e1ba8-07cb-4d71-ad33-8dc320df6183
Giamouridis, Daniel, Sakkas, Athanasios and Tessaromatis, Nikolaos
(2017)
Dynamic asset allocation with liabilities.
European Financial Management, 23 (2), .
(doi:10.1111/eufm.12097).
Abstract
We develop an analytical solution to the dynamic multi-period portfolio choice problem of an investor with risky liabilities and time varying investment opportunities. We use the model to compare the asset allocation of investors who take liabilities into account, assuming time varying returns and a multi-period setting with the asset allocation of myopic ALM investors. In the absence of regulatory constraints on asset allocation weights, there are significant gains to investors who have access to a dynamic asset allocation model with liabilities. The gains are smaller under the typical funding ratio constraints faced by pension funds.
More information
Accepted/In Press date: 24 March 2016
e-pub ahead of print date: 15 November 2016
Published date: 1 March 2017
Organisations:
Centre of Excellence for International Banking, Finance & Accounting
Identifiers
Local EPrints ID: 392634
URI: http://eprints.soton.ac.uk/id/eprint/392634
PURE UUID: 12107075-7452-4c63-97c9-d3660076cd0c
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Date deposited: 05 May 2016 11:33
Last modified: 14 Mar 2024 23:49
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Contributors
Author:
Daniel Giamouridis
Author:
Athanasios Sakkas
Author:
Nikolaos Tessaromatis
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