Liability-driven investment: multiple liabilities and the question of the number of moments

The selection of investments held in dedicated pension or insurance asset portfolios should be liability-driven. Techniques have been developed to hedge or immunize single liabilities from the effects of a variety of yield curve changes. In this paper, we extend these results to a more relevant prac...

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Bibliographic Details
Published inThe European journal of finance Vol. 16; no. 5; pp. 413 - 435
Main Authors Theobald, Michael F., Yallup, Peter J.
Format Journal Article
LanguageEnglish
Published London Routledge 01.07.2010
Taylor and Francis Journals
Taylor & Francis LLC
SeriesEuropean Journal of Finance
Subjects
duration
Government bonds
Hedging
Immunization
index tracking
Insurance
Investment
Liability
liability-driven investment
Mathematical finance
multiple liabilities
Pension funds
Portfolio management
Risk management
Studies
United Kingdom
Yield
United Kingdom > UK
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Summary:The selection of investments held in dedicated pension or insurance asset portfolios should be liability-driven. Techniques have been developed to hedge or immunize single liabilities from the effects of a variety of yield curve changes. In this paper, we extend these results to a more relevant practical problem, to immunize multiple liabilities occurring at different times in the future. This immunization approach can accommodate a variety of non-parallel yield curve behaviours. In a practical application, we demonstrate that our approach is effective in selecting index tracking portfolios in the UK Gilt (government bond) market.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:1351-847X
1466-4364
DOI:10.1080/13518470903211681