Stochastic modeling of assets and liabilities with mortality risk

Bank’s Assets and Liabilities Management With multiple Sources of Risk

The industrial organization approach to banking is applied to analyze the effects of the introduction of joint credit and interbank rate risk on the optimal decisions on deposits and loans of a competitive bank. It is found that due to the introduction of both sources of risk there appear direct effects as well as portfolio effects which jointly determine changes in the bank’s behavior. Moreove...

Linking Pension Liabilities to Assets

2 Pension assets exist to defease the benefit promises made by plan sponsors to participants and beneficiaries—in other words, the pension liability. It follows that pension investment policies should be set in a way that explicitly integrates the exposures of the pension liability. The traditional approach to pension investing has excluded the risks of the liability, which has resulted in port...

A Cray T3E implementation of a parallel stochastic dynamic assets and liabilities management model

Asset and liability management (ALM) models represent an important tool for banks and ®nance companies to measure the volatility of expected revenues. These models ± usually static and deterministic to ®t conventional computer resources ± may be much more useful if a dynamic stochastic simulation is adopted. This makes it possible to increase the precision of risk estimation. In this paper the ...

Dynamic Replication of Non-Maturing Assets and Liabilities

Strategic management of assets and liabilities using multi-year internal risk models

Major changes in competitive behaviour, recent dynamics in capital markets, and fundamental changes in regulatory requirements (Solvency II for European Union member countries) have placed increasing challenges on management strategy in insurance companies. Management is faced with a complex decision-making and strategic task of allocating and managing capital resources efficiently. This requir...