Chapter 20 ERA 2.4 Asset-Liability Management - Brehm

Asset liability Management definition 20.1

Optimal portfolio under 4 different scenarios

  • Going concern is most complicated as it includes cash flow coming in

Additional considerations with tax and equity

  • If we are not matching the duration, best to just invest in long bonds

9 steps of asset liability modeling

  1. Model Asset Classes, Liabilities, and Current Business Operations

  2. Define Risk Metrics

  3. Return Metrics

  4. Time Horizon

  5. Consider Relevant Constraints

  6. Simulation Model

  7. Efficient Frontier Graph

  8. Liabilities

  9. Review Results

Areas for future research are correlations and reserve models that are explanatory model