![Asset and liability management under a continuous-time mean-variance optimization framework [An article from: Insurance Mathematics and Economics]](https://www.ebooknetworking.net/books/B00/0PA/bigB000PAV0CC.jpg)
Asset and liability management under a continuous-time mean-variance optimization framework [An article from: Insurance Mathematics and Economics]
Book Details
Author(s)M.C. Chiu, D. Li
PublisherElsevier
ISBN / ASINB000PAV0CC
ISBN-13978B000PAV0C2
MarketplaceUnited Kingdom 🇬🇧
Description
This digital document is a journal article from Insurance Mathematics and Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
Asset and liability (AL) management under the mean-variance criteria refers to an optimization problem that maximizes the expected final surplus subject to a given variance of the final surplus or, equivalently, minimizes the variance of the final surplus subject to a given expected final surplus. We employ stochastic optimal control theory to analytically solve the AL management problem in a continuous-time setting. More specifically, we derive both the optimal policy and the mean-variance efficient frontier by a stochastic linear quadratic control framework. Then, the quality of the derived optimal AL management policy is examined by comparing it with those in the literature. We further discuss consequences of a discrepancy in objectives between equity holders and investors of a mutual fund. Finally, the optimal funding ratio, i.e., the wealth-to-liability ratio, is determined.
Description:
Asset and liability (AL) management under the mean-variance criteria refers to an optimization problem that maximizes the expected final surplus subject to a given variance of the final surplus or, equivalently, minimizes the variance of the final surplus subject to a given expected final surplus. We employ stochastic optimal control theory to analytically solve the AL management problem in a continuous-time setting. More specifically, we derive both the optimal policy and the mean-variance efficient frontier by a stochastic linear quadratic control framework. Then, the quality of the derived optimal AL management policy is examined by comparing it with those in the literature. We further discuss consequences of a discrepancy in objectives between equity holders and investors of a mutual fund. Finally, the optimal funding ratio, i.e., the wealth-to-liability ratio, is determined.
