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arXiv · 1303.3956

A liability tracking approach to long term management of pension funds

Masashi Ieda·Takashi Yamashita·Yumiharu Nakano
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Abstract

We propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the liability by directly tracking a benchmark process which represents the liability. Two numerical results using empirical data published by Japanese organizations are served: simulations tracking an artificial liability and an estimated liability of Japanese organization. The latter one demonstrates that our optimal portfolio strategy can hedge his or her liability.

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Masashi Ieda, Takashi Yamashita, Yumiharu Nakano. 2013-03-16. A liability tracking approach to long term management of pension funds. https://arxiv.org/abs/1303.3956

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