Worldwide Asset and Liability Modeling

Deals with areas at interface between finance and mathematics.

The underlying theme of this volume is how to invest assets over time to achieve satisfactory returns subject to uncertainties, various constraints and liability commitments. Most investors, be they individuals or institutions, do not diversify properly across markets nor across time. The papers utilize several approaches and integrate a number of techniques as well as discussing a variety of models that have either been implemented, are close to being implemented, or represent new innovative approaches that may lead to future novel applications. Other issues address the future of asset-liability management modeling. This includes models for individuals, and various financial institutions such as banks and insurance companies. This will lead to custom products, that is, financial engineering. All in all, this will be essential reading for all involved in analysing the financial markets.

Part I. Introduction: 1. Asset and liability management systems for long-term investors: discussion of the issues John M. Mulvey and William T. Ziemba; Part II. Static Portfolio Analysis for Asset Allocation: 2. The importance of the asset allocation decision Chris R. Hensel, D. Don Ezra and John H. Ikliw; 3. The effect of errors in means, variances, and covariances on optimal portfolio choice Vijay K. Chopra and William T. Ziemba; 4. Making superior asset allocation decisions: a practitioner's guide Chris R. Hensel and Andrew L. Turner; Part III. Performance Measurement Models: 5. Attribution of performance and holdings Richard C. Grinold and Kelly A. Easton; 6. National versus global influences on equity returns Stan Beckers, Gregory Connor and Ross Curds; 7. A global stock and bond model Lucie Chaumeton, Gregory Connor and Ross Curds; Part IV. Dynamic Portfolio Models for Asset Allocation: 8. On timing the market: the empirical probability assessment approach with an inflation adapter Robert R. Grauer and Nils Hakansson; 9. Multiperiod asset allocation with derivative assets David R. Carino and Andrew L. Turner; 10. The use of Treasury bill futures in strategic asset allocation programs Michael J. Brennan and Edwardo S. Schwartz; Part V. Scenario Generation Procedures: 11. Barycentric approximation of stochastic interest rate processes Karl Frauendorfer and Michael Schürle; 12. Postoptimality for scenario based financial planning models with an application to bond portfolio management Jitka Dupacova, Marida Bertocchi and Vittorio Moriggia; 13. The Towers Perrin global capital market scenario generation system John M. Mulvey and A. Eric Thorlacius; Part VI. Currency Hedging and Modelling Techniques: 14. An algorithm for international portfolio selection and optimal currency hedging Markus Rudolf and Heinz Zimmerman; 15. Optimal insurance asset allocation in a multi-currency environment John C. Sweeney, Steve Sonlin, Salvatore Correnti and Amy P. Williams; Part VII. Dynamic Portfolio Analysis with Assets and Liabilities: 16. Optimal investment strategies for university endowment funds Robert C. Merton; 17. Optimal consumption-investment decisions allowing for bankruptcy: a survey Suresh Sethi; 18. Solving stochastic programming models for asset/liability management using iterative disaggregation Pieter Klaassen; 19. The CALM stochastic programming model for dynamic asset-liability management Georgio Consigli and Michael A. H. Dempster; 20. A dynamic model for asset liability management for defined benefit pension funds Cees Dert; 21. Asset and liability management under uncertainty for fixed income securities Stavros A. Zenios; Part VIII. Case Studies of Implemented Asset-liability Management Models: 22. Modelling and management of assets and liabilities of pension plans in The Netherlands Guus C. E. Boender, Paul van Aalst and Fred Heemskerk; 23. Integrated asset-liability management: an implementation case study Martin Holmer; Part IV. Total Integrated Risk Management Models: 24. The Russell-Yasuda Kasai model: an asset/liability model for a Japanese insurance company using multistage stochastic programming David R. Carino, Terry Kent, David H. Myers, Celine Stacy, Michael Sylvanus, Andrew Turner, Kanji Watanabe and William T. Ziemba; 25. The home account advisor: asset and liability management for individual investors Adam J. Berger and John M. Mulvey.

These papers discuss how to invest assets over time to achieve satisfactory returns subject to uncertainties, various constraints and liability commitments. They integrate a number of techniques and discuss various models that may lead to future novel applications, i.e. financial engineering.