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Asset allocation strategies in the presence of liability constraints

Author

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  • Cousin, Areski
  • Jiao, Ying
  • Robert, Christian Y.
  • Zerbib, Olivier David

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.

Suggested Citation

  • Cousin, Areski & Jiao, Ying & Robert, Christian Y. & Zerbib, Olivier David, 2016. "Asset allocation strategies in the presence of liability constraints," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 327-338.
  • Handle: RePEc:eee:insuma:v:70:y:2016:i:c:p:327-338
    DOI: 10.1016/j.insmatheco.2016.06.020
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    References listed on IDEAS

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