Asset allocation strategies in the presence of liability constraints

Areski Cousin, Ying Jiao, Christian Yann Robert, Olivier David Zerbib

Research output: Contribution to journalArticleScientificpeer-review

Abstract

The performance of portfolio managers is usually assessed by comparing their allocation strategies to a benchmark portfolio. A major issue for portfolio managers of liability driven institutions is that no benchmark is given to them, although they face mid-term objectives with short term constraints. No performance attribution methodology may then be used to serve as a reference. Assessing the performance of the asset manager as an agent, represents a major stake for the institution as a principal delegating a mandate of asset management. We propose an optimal asset allocation approach taking into account liability constraints to build a benchmark. This benchmark will be used to compare the ex-post effective performance of the asset manager to the effective performance of the ex-ante optimal dynamic asset allocation.
Original languageEnglish
Pages (from-to)327-338
JournalInsurance: Mathematics & Economics
Volume70
DOIs
Publication statusPublished - Sep 2016
Externally publishedYes

Keywords

  • optimal allocation
  • asset-liability management
  • benchmarking
  • performance analysis
  • credit risk

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