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.
|Title of host publication||Optimization and control for systems in the big-data era: Theory and applications|
|Editors||Tsan-Ming CHOI, Jianjun GAO, James H. LAMBERT, Chi-Kong NG, Jun WANG|
|Place of Publication||Cham|
|Publication status||Published - 2017|
Optimal control theory
Stochastic optimal control
CitationChiu, 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.
- Asset-liability management
- Utility theory