Asset-liability management in continuous-time: Cointegration and exponential utility

Research output: Chapter in Book/Report/Conference proceedingChapter

3 Citations (Scopus)

Abstract

Using the technique of dynamic portfolio optimization, Chiu and Li (Insur. Math. Econ. 39:330–355, 2006) pioneered the optimal asset-liability management (ALM) framework for investors and insurers in a continuous-time economy. Their approach has been generalized to different objective functions under different stochastic models for the assets and the liabilities. This paper briefly summarizes recent advances along this research direction based on the author’s personal interest and the required quantitative tools from stochastic optimal control theory. A new ALM solution is then derived for constant absolute risk averse insurers subject to cointegrated assets and compound Poisson-type insurance liabilities. Copyright © 2017 Springer International Publishing AG.
Original languageEnglish
Title of host publicationOptimization and control for systems in the big-data era: Theory and applications
EditorsTsan-Ming CHOI, Jianjun GAO, James H. LAMBERT, Chi-Kong NG, Jun WANG
Place of PublicationCham
PublisherSpringer
Pages85-100
ISBN (Electronic)9783319535180
ISBN (Print)9783319535166
DOIs
Publication statusPublished - 2017

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Asset-liability management
Exponential utility
Continuous time
Assets
Cointegration
Insurer
Liability
Research directions
Objective function
Compound Poisson
Liability insurance
Investors
Stochastic model
Risk-averse
Optimal control theory
Stochastic optimal control
Portfolio optimization

Citation

Chiu, M. C. (2017). Asset-liability management in continuous-time: Cointegration and exponential utility. In T.-M. Choi, J. Gao, J. H. Lambert, C.-K. Ng, & J. Wang (Eds.), Optimization and control for systems in the big-data era: Theory and applications (pp. 85-100). Cham: Springer International Publishing.

Keywords

  • Asset-liability management
  • Cointegration
  • Utility theory