Rebalancing Strategies for Long-Term Investors

Leading pension plans use asset and liability management systems to optimizise their strategic decisions.

Author(s):

John M. Mulvey

Department of Operations Research and Financial EngineeringBendheim Center for Finance, Princeton University

Koray D. Simsek

Associate Professor of Finance, EDHEC Business SchoolResearch Associate, EDHEC-Risk Institute

The multi-stage models link asset allocation decisions with payments to beneficiaries, changes to plan policies and related issues, to maximize the plan's surplus within a given risk tolerance. Temporal aspects complicate the problem but give rise to special opportunities for dynamic investment strategies. Within these models, the portfolio must be re-revised in the face of transaction and market impact costs. The rebalancing problem is posed as a generalized network with side conditions. We develop a specialized algorithm for solving the resulting problem. A real-world pension example illustrates the concepts.
Pdf
Rebalancing Strategies for Long-Term Investors...
(-1.00 B)
Type: Working paper
Date: le 11/04/2007
Extra information : For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.
Research Cluster : Finance

See Also

Bond Portfolio Optimization in the Presence of Duration Constraints - EDHEC-Risk Institute research article in the Journal of Fixed Income
News
- 19-07-2018
We are pleased to enclose an EDHEC-Risk Institute research article published in the...
Lionel Martellini discussed ageing population: goal-based investing and its application to the retirement problem
News
- 10-07-2018
Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-...
[EDHEC Experience] Light on the first urban Lab of Latin America
News
- 09-07-2018
Wide Open: in the explorers' shoes The third stopover of the Wide Open project has been...
EDHECInfra Days: Infrastructure Investors need proper benchmarks
News
- 05-07-2018
Earlier this month we held the first EDHECinfra Days event in London, bringing together...