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A theoretical analysis of the matching of assets to liabilities

Published online by Cambridge University Press:  20 April 2012

A. J. Wise
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Extract

1.1. This paper is supplementary to another by the same author on the subject of matching. It describes the mathematical analysis of the following problem.

1.2. We are given:

1. a pattern of expected future cash flows under a pension scheme or insurance contract;

2. a set of investments available for purchase; and

3. a model of the future behaviour of investment conditions.

What set or sets of available investments would provide the best match against the given liabilities in order to minimize any likely surplus or deficiency on completion of the liability cash flows?

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 111 , Issue 2 , September 1984 , pp. 375 - 402
Copyright
Copyright © Institute and Faculty of Actuaries 1984

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References

REFERENCES

(1) Wise, A. J. The Matching of Assets to Liabilities. J.I.A. 111, 445.Google Scholar
(2) Redington, F. M. Review of the Principles of Life Office Valuations. J.I.A. 78, 286.Google Scholar
(3) Wolfe, P. The Simplex Method for Quadratic Programming. Econometrica 27, 382.CrossRefGoogle Scholar
(4) Beale, E. M. L. (1967). Non-linear Programming, Chap. 7. J. Abadie, (ed.), North-Holland.Google Scholar
(5) Kuhn, H. W. & Tucker, A. W. (1951). Non-linear programming. Proceedings of the Second Berkeley Symposium on Mathematical Statistics and Probability, p. 481. Neyman, J. (ed.), University of California PressBerkeley.Google Scholar