Important research has already been made on the potentially destabilizing fiscal impact of contingent liabilities. Additional insights can be gained by working within a broader conceptual framework based on the government’s balance sheet. This approach would place contingent liabilities alongside other sovereign exposures arising from both assets and liabilities. A number of sovereigns using as...

We extend the Vasiček loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and analyze its properties. We find that the impact of liability risk is ambiguous and depends on the correlation between the continuous aggregate factor and the as...

Behavioral operations management, or simply behavioral operations (BOps), aims at understanding the decision-making of managers and at using this understanding to generate interventions that improve the operation of the supply chain. To do so, BOps imports knowledge from a number of fields such as economics, psychology and other social and behavioral sciences. We point out a blind spot in this ...

Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio which outperforms a given set of stochastic benchmarks at a sequence of future dates. For a specified loss function, the shortfall with respect to each of the benchmarks weighted by this loss function must remain bounded in expectation by a given thresh...

Abstract — An Asset-Liability Management model with a novel strategy for controlling risk of underfunding is presented in this paper. The basic model involves Multi-Period decisions (portfolio optimization) and deals with the usual uncertainty of investment returns and future liabilities. Therefore, is it well suited to a stochastic programming approach. We consider the problem of rebalancing p...

The fundamental equation of asset pricing states that the expected timeand risk-adjusted cumulative return on any asset equals one at all horizons. This paper shows that for a typical asset, the realized timeand risk-adjusted cumulative return tends to zero with probability one. Just two assumptions are required: limited liability and no arbitrage. This apparent paradox is resolved by a further...

Lane and Milesi-Ferretti gather data on assets and liabilities of 18 OECD countries. The data are classified by type of asset–debt instruments and equity instruments (either portfolio or foreign direct investment). To some extent the data allow them to classify changes in asset and liability positions that occur because of capital flows versus changes in valuation. With this data, Lane and Mile...

This paper examines the effects of liability-sharing rules on social welfare and risk reduction when one firm (the principal) delegates indivisible hazardous activities to one of the potential firms (the agents). The problem is posed as providing incentives from the principal to the agents, through the contract, to reduce the level of accident probability under a liability rule in force. Our ma...

This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers the modeling liability (or funding liquidity), second dedicated to market whereas third considers management asset-liability matching). purpose this propose methodological and practical framework order perform stress testing progr...

Abstract The asset-liability management problem with cash flow under an uncertain exit time has been investigated in this article, which is based on the fundamental framework of mean-variance model multi-period version. liability and random will affect asset optimization, while investor may be forced to withdraw from investments a probability at each period our model. closed-form expressions fo...