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.
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 [ ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.
Research Cluster : Finance

See Also

Assets replicating Scientific Beta’s multi-factor indices reach USD 25bn
- 22-02-2018
Scientific Beta, the smart beta index provider offshoot of EDHEC-Risk Institute, has...
EDHEC Named France National Champions of the KPMG International Case Competition
- 20-02-2018
Impact Consulting, a team of four, EDHEC M1 Business Management students, are national...
Investing in Relationships: Why trust matters in private banking
- 19-02-2018
  The presentation, The Private Banking Industry – Current Mapping and Future...
- 16-02-2018
Looking to advance your career ?  Join the Global MBA team for an exclusive OPEN...