research paper on asset liability management

Optimal Asset Allocation in Asset Liability Management

We study the impact of regulations on the investment decisions of a defined benefits pension plan. We assess the influence of ex ante (preventive) and ex post (punitive) risk constraints on the gains to dynamic, as opposed to myopic, decision making. We find that preventive measures, such as Value-at-Risk constraints, tend to decrease the gains to dynamic investment. In contrast, punitive constraints, such as mandatory additional contributions from the sponsor when the plan becomes underfunded, lead to very large utility gains from solving the dynamic program. We also show that financial reporting rules have real effects on investment behavior. For example, the current requirement to discount liabilities at a rolling average of yields, as opposed to at current yields, induces grossly suboptimal investment decisions.

We thank Tim Bollerslev, Frank de Jong, Joachim Inkmann, Ralph Koijen, Vinay Nair, Theo Nijman, Anamaria Pieschacon, George Tauchen, Bas Werker, and seminar participants at the 2005 SAMSI conference on Financial Mathematics, Statistics and Econometrics, Duke University, Tilburg University and ABP Investments for helpful discussions and comments. Jules van Binsbergen thanks the Prins Bernhard Cultuurfonds for generous financial support. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.

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Asset-liability management for long-term insurance business

• Original Research Paper
• Published: 16 April 2018
• Volume 8 , pages 9–25, ( 2018 )

Cite this article

• Hansjörg Albrecher   ORCID: orcid.org/0000-0002-5434-9270 1 ,
• Daniel Bauer 2 ,
• Paul Embrechts 3 ,
• Damir Filipović 4 ,
• Pablo Koch-Medina 5 ,
• Ralf Korn   ORCID: orcid.org/0000-0002-9123-3883 6 ,
• Stéphane Loisel 7 ,
• Antoon Pelsser 8 ,
• Frank Schiller 9 ,
• Hato Schmeiser 10 &
• Joël Wagner   ORCID: orcid.org/0000-0002-3712-5494 1  

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This is a summary of the main topics and findings from the Swiss Risk and Insurance Forum 2017. That event gathered experts from academia, insurance industry, regulatory bodies, and consulting companies to discuss past and current developments as well as future perspectives in dealing with asset-liability management for long-term insurance business. Topics include valuation, innovations in insurance products, investment, and modelling aspects.

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For more information on LTG measures and transitionals, please refer to https://eiopa.europa.eu/GuidelinesSII/EIOPA_EN_LTG_GLs.pdf and delegated act 2015/35, 2016/467, and 2016/2283 of the European Commission.

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Acknowledgements

We thank Stephan Schreckenberg for suggesting the format of the conference, and for his critical and active support in the creation of the Swiss Risk and Insurance Forum. We thank all participants for the stimulating and lively discussion: Albrecher Hansjörg, University of Lausanne; Bailly Alexis, Moody’s Analytics; Daniel Bauer, University of Alabama; Embrechts Paul, ETH Zurich and Swiss Finance Institute; Filipovic Damir, EPFL and Swiss Finance Institute; Germann Hansjörg, Zurich Insurance; Grützner Guido, QuantAkt; Guerin Jean-Francois, Swiss Life; Harrison Glenn, Georgia State University; Jäger Jan, Swiss Re; Jaschke Stefan, Infinada; Joos Pierre, Allianz; Jorgensen Peter Lochte, University of Aarhus; Kalberer Tigran, Milliman; Keller Philipp, Deloitte; Koch Pablo, University of Zurich; Korn Ralf, TU Kaiserslautern; Kunz Andreas, Munich Re; Leukert Renate, Swiss Re; Loisel Stéphane, Université Lyon 1; Moeller Thomas, PFA and University of Copenhagen; Pelsser Antoon, Maastricht University; Popp Markus, Munich Re; Schätti Guido, Swiss Re; Schiller Frank, Munich Re; Schmeiser Hato, University of St. Gallen; Schmutz Michael, Finma and University of Bern; Schreckenberg Stephan, Swiss Re; Singh Raj, Standard Life; Smith Andrew, Deloitte; Steiger Gallus, Swiss Re; Tommasina Tancredi, Swiss Life; Wagner Joël, University of Lausanne; Weber Frank, PwC; Werner Ralf, University of Augsburg; Wilson Tom, Allianz. The Swiss Risk and Insurance Forum 2017 received financial support from Swiss Re, Swiss Life, the Swissquote Chair in Quantitative Finance at EPFL, the ETH Risk Centre and RiskLab, the Center for Finance and Insurance at the University of Zurich and the Department of Actuarial Science of the University of Lausanne.

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Department of Actuarial Science, Faculty of Business and Economics, University of Lausanne and Swiss Finance Institute, Lausanne, Switzerland

Hansjörg Albrecher & Joël Wagner

Culverhouse College of Commerce, The University of Alabama, Tuscaloosa, US

Daniel Bauer

RiskLab and Swiss Finance Institute, ETH Zurich, Zurich, Switzerland

Paul Embrechts

EPFL and Swiss Finance Institute, Lausanne, Switzerland

Damir Filipović

Center for Finance and Insurance, University of Zurich, Zurich, Switzerland

Pablo Koch-Medina

Fachbereich Mathematik, Technische Universität Kaiserslautern, and Fraunhofer ITWM, Kaiserslautern, Germany

Institut de Science Financiére et d’Assurances (ISFA), Laboratoire SAF, Université Claude Bernard Lyon, Lyon, France

Stéphane Loisel

Maastricht University, Netspar, The Netherlands

Antoon Pelsser

Munich Re, Munich, Germany

Frank Schiller

Institute of Insurance Economics, University of St. Gallen, St. Gallen, Switzerland

Hato Schmeiser

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Correspondence to Hansjörg Albrecher .

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Albrecher, H., Bauer, D., Embrechts, P. et al. Asset-liability management for long-term insurance business. Eur. Actuar. J. 8 , 9–25 (2018). https://doi.org/10.1007/s13385-018-0167-5

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Received : 18 December 2017

Accepted : 19 March 2018

Published : 16 April 2018

Issue Date : June 2018

DOI : https://doi.org/10.1007/s13385-018-0167-5

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An Analysis of Asset-Liability Management in Banking Sector: A Case Study of Kotak Mahindra Bank

The Indian Financial System have changing and growing very fast way. Competitive business world involving both the asset and liabilities with changing interest rates as well as foreign exchange rates has brought pressure on the management of banks to maintain good profitability.Assets and Liability Management (ALM) is a systematic and dynamic process of planning, organizing, coordinating and controlling the assets and liabilities or in the sense management of balance sheet structure in the bank is the biggest opportunity for the Indian banking system. The main objectives of the study is to understand the theoretical background of assets liability management and profile of the bank in general and to assess the performance of profitability position in Kotak Mahindra Bank and also to evaluate the performance of profit and loss account and balance sheet ratios in Kotak Mahindra Bank. In this paper data has been collected from secondary sources from annual reports of Kotak Mahindra Bank from the period of 2013-14 to 2017-18.Finally to analyze the performance of assets and liabilities management has been measured it results the credit deposit ratio, quick ratio, interest expanded to interest earn, other income to total income and interest spreadthis ratios showing increasing trend from one year to another year therefore the performance of assets liability management position is satisfactory and better in Kotak Mahindra Bank.

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