Search results for "Asset and liability management"
showing 6 items of 6 documents
The value of integrative risk management for insurance products with guarantees
2001
Insurance liabilities are converging with capital markets products (e.g. derivatives and securitizations), thereby increasing the demand for integrated asset and liability management strategies. This article compares the value-added by an integrative approach-based on scenario optimization modelling-relative to traditional risk management methods. The authors present some examples of products offered by the insurance industry in Italy, and apply the results of the analysis to the design of competitive insurance policies. © Emerald Backfiles 2007.
Scenario optimization asset and liability modelling for individual investors
2006
We develop a scenario optimization model for asset and liability management of individual investors. The individual has a given level of initial wealth and a target goal to be reached within some time horizon. The individual must determine an asset allocation strategy so that the portfolio growth rate will be sufficient to reach the target. A scenario optimization model is formulated which maximizes the upside potential of the portfolio, with limits on the downside risk. Both upside and downside are measured vis- `a-vis the goal. The stochastic behavior of asset returns is captured through bootstrap simulation, and the simulation is embedded in the model to determine the optimal portfolio. …
Asset and Liability Management for Insurance Products with Minimum Guarantees: The UK Case
2006
Abstract Modern insurance products are becoming increasingly complex, offering various guarantees, surrender options and bonus provisions. A case in point are the with-profits insurance policies offered by UK insurers. While these policies have been offered in some form for centuries, in recent years their structure and management have become substantially more involved. The products are particularly complicated due to the wide discretion they afford insurers in determining the bonuses policyholders receive. In this paper, we study the problem of an insurance firm attempting to structure the portfolio underlying its with-profits fund. The resulting optimization problem, a non-linear program…
Asset and Liability Modelling for Participating Policies with Guarantee
2008
We study the problem of asset and liability management of participating insurance policies with guarantees. We develop a scenario optimization model for integrative asset and liability management, analyze the tradeoffs in structuring such policies, and study alternative choices in funding them. The nonlinearly constrained optimization model can be linearized through closed form solutions of the dynamic equations. Thus large-scale problems are solved with standard methods. We report on an empirical analysis of policies offered by Italian insurers. The optimized model results are in general agreement with current industry practices. However, some inefficiencies are identified and potential im…
The prometeia model for managing insurance policies with guarantees
2008
Publisher Summary This chapter discusses the development of a scenario-based optimization model for asset and liability management for the participating policies with guarantees and bonus provisions offered by Italian insurers. The changing landscape of the financial services in Italy sets the backdrop for the development of this system which was the result of a multi-year collaborative effort between academic researchers, the research staff at Prometeia in Bologna, and end-users from diverse Italian insurers. It also presents and discusses the model and its key feature, and introduces several extensions. The resulting system allows the analysis of the tradeoffs facing an insurance firm in …
Theory and regulation of liquidity risk management in banking
2016
Liquidity risk is now more important than it used to be in the past. The financial crisis has emphasised the importance of liquidity risk to the functioning of banking and financial system. The paper presents a theoretical and regulatory investigation of two types of liquidity risk: funding liquidity risk and market liquidity risk. The paper analyses the different approaches to measure the impact of funding and market liquidity risk in the economics and management of banks. The paper provides also an analysis of the organisational implications of the asset and liability management perspective of liquidity risk. Liquidity risk does not need to be covered by equity but by an adequate volume o…