In the context of the historical development of portfolio theory the authors describe a stochastic asset/liability modelling exercise for a closed pension fund portfolio, illustrating the reduction in variance of estimated future surplus which can be achieved by investment in index-linked securities. Equity investment would increase the expected level of surplus, but the outcome would be more u...

Uncertainty of insurance liabilities has always been the key issue in actuarial theory and practice. This is represented for instance by study and modeling of mortality in life insurance, and loss distributions in traditional actuarial science. These models have evolved from early simple deterministic calculations to more sophisticated probabilistic ones. Such probabilistic models have been tra...

Employers have many financial, liability and human resource reasons for providing employees purchase substance abuse treatment programs. However, using medical insurance to facilitate the purchase of this service does not make sense. This column explains why insurance is not the best vehicle for providing treatment for chemical dependency and how the purchasing of such a service can be better m...

In Asset and Liability Management (ALM) models, there are parameters whose values not known with certainty at decision time, such as future asset returns, liability contribution values. Simulation models generate possible “scenarios” for these parameters, which used inputs in the optimisation help thus making decisions. These decisions can be evaluated sample, on same scenarios that were decisi...

This article provides a detailed analysis of the theoretical, statistical, and implementation challenges related to factor investing in US sovereign bond markets, with focus on level factor, which explains for any maturity largest fraction differences returns over time. Using comprehensive database individual United States covering 1975–2018 sample period, authors find that conditional version ...

Local volatilities in multi-asset models typically have no cross-asset dependency. In this talk, we propose a general framework for pricing and hedging derivatives in cross-dependent volatility (CDV) models, i.e., multi-asset models in which the volatility of each asset is a function of not only its current or past levels, but also those of the other assets. For instance, CDV models can capture...

Asset/Liability management, optimal fund design and optimal portfolio selection have been key issues of interest to the (re)insurance and investment banking communities, respectively, for some years especially in the design of advanced risktransfer solutions for clients in the Fortune 500 group of companies. Building on the new concept of limited risk arbitrage investment management in a diffus...

Abstract Marxists see firm ownership as an instrument for capitalists to exploit workers for “surplus value”. Neo-classical economists treat capital and labour equally as factors of production, which generate wages for workers and profits for capital owners. Both “Surplus value” and profits should be, and indeed are, on average, positive in typical market economies. This paper proposes a theory...

Although emerging market Asian economies have experienced high growth without crises for close to a decade, many commentators find the large buildup of foreign exchange reserves among these economies both puzzling and evidence of incipient global imbalances. This paper reviews some of the experience of Asian countries over the last decade. We focus on the degree to which Asian economies have ex...