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Alternative inflation hedging strategies for ALM

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  • Fulli-Lemaire, Nicolas

Abstract

Gone are the days when inflation fears had receded under years of “Great Moderation” in macroeconomics. The US subprime financial crisis, the ensuing “Great Recession” and the sovereign debt scares that spread throughout much of the industrialized world brought about a new order characterized by higher inflation volatility, severe commodity price shocks and uncertainty over sovereign bond creditworthiness to name just a few. All of which tend to put in jeopardy both conventional inflation protected strategies and nominal unhedged ones: from reduced issues of linkers to negative long-term real rates, they call into question the viability of current strategies. This paper investigates those game changing events and their asset liability management consequences for retail and institutional investors. Three alternative ways to achieve real value protection are proposed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43755.

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Date of creation: 24 Jan 2013
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Handle: RePEc:pra:mprapa:43755

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Keywords: Inflation Hedging; Portfolio Allocation; Alternative Investment; Commodities; Real Rates; Core Inflation; Global Macro; Inflation Pass-through; Strategic Allocation; Portfolio Insurance; Great Recession;

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