We propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the liability by directly tracking a benchmark process which represents the liability. Two…
On-device research index
arXiv research
A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
168,657 papers · 148 categories
Trend · papers per month
48 results for “liability”
This paper studies optimal investment from the point of view of an investor with longevity-linked liabilities. The relevant optimization problems rarely are analytically tractable, but we are able to show numerically that liability driven investment can significantly outperform common strategies that do not take the li…
Optimal control solves multi-period liability clearing problems.
problem Clearing liabilities among entities over multiple periods.
method Formulated as a convex optimal control problem, solved using convex costs and constraints.
result Solves the problem of clearing liabilities among entities over multiple periods.
Study finds environmental liability insurance reduces industrial carbon emissions.
problem Reduction of industrial carbon emissions.
method Two-way fixed effect model using provincial (city) level panel data from 2010 to 2020.
result Environmental liability insurance reduces industrial carbon emissions at both direct and indirect levels, with varying effects.
The study shows that limited liability can make banks more stable by choosing less risky assets.
problem How limited liability affects bank stability and risk management.
method Dynamic portfolio approach with continuous time models, including and excluding limited liability, and using the KMV model to measure resiliency.
result Inclusion of limited liability leads to a bank choosing less risky assets, increasing its resilience.
Limited liability reduces leveraged risk in loan portfolio management models.
problem The impact of limited liability on risk in loan portfolio management models is not well understood.
method Formulated four models to analyze the effect of limited liability on risk and return in loan portfolio management.
result Including limited liability in loan portfolio management models produces better results in minimizing risk and maximizing expected return.
Unified framework for fixed-income pricing and liability replication.
problem Static arbitrage and discount curve construction.
method Model-free framework for static fixed-income pricing and liability replication.
result Existence of strictly positive discount curves reproducing market prices and least-cost super-replicating portfolios.
In this paper, we consider the asset-liability management under the mean-variance criterion. The financial market consists of a risk-free bond and a stock whose price process is modeled by a geometric Brownian motion. The liability of the investor is uncontrollable and is modeled by another geometric Brownian motion. W…
Stochastic model for pension insurer assets and liabilities with mortality risk.
problem Modeling assets and liabilities with mortality risk in pensions insurers.
method Multivariate stochastic process for asset and liability returns, capturing dynamics and dependencies.
result Efficient computation of a million scenarios on personal computers.
Paper assesses GMMB in VAs using FST for accurate net liability calculations.
problem Risk management of GMMB under stochastic mortality and regime-switching.
method Net liability model with FST algorithm for accurate numeric solutions.
result FST algorithm provides reliable results for net liability of GMMB.
Classification problem in liability insurance using machine learning models: a comparative studystat.AP
Study classifies liability insurance policies using machine learning.
problem Classifying liability insurance policies with or without claims.
method Used machine learning models like nearest neighbour and logistic regression on Actuarial Challenge dataset.
result Models accurately classified policies into claims and non-claims groups.
Framework for realistic insurance liability valuation.
problem Economic realism in insurance liability valuation.
method Replication approach of no-arbitrage theory, considering capital and fulfillment conditions.
result Identifies conditions for market price recovery and extends production for insolvency.
The paper introduces deep learning for ALM, enhancing asset and liability management.
problem Optimizing asset and liability management for treasurers and other applications.
method Deep learning applied to ALM for optimal decision making.
result Enhanced ALM approach for better asset and liability management.
Optimal portfolios for fat-tailed risks using a new tail risk measure.
problem Optimizing portfolios for pension funds and insurance liabilities with extreme risk sensitivity.
method Developed a new tail risk measure (Extreme Deviation, XD) and optimized portfolios based on this measure.
result Optimal portfolios maximize return per unit of XD, balancing hedging and risk contributions.
We quantify the sensitivity of the Eisenberg-Noe clearing vector to estimation errors in the bilateral liabilities of a financial system in a stylized setting. The interbank liabilities matrix is a crucial input to the computation of the clearing vector. However, in practice central bankers and regulators must often es…
We extend the Vasiček loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and analyze its properties. We find that the impact of liability risk is ambiguous and …
Liquidity Stress Testing in Asset Management -- Part 1. Modeling the Liability Liquidity Riskq-fin.RM
This research proposes methods to model and assess liability liquidity risk in asset management.
problem Lack of standardized models for liability liquidity risk in asset management.
method Statistical models, zero-inflated models, aggregate and individual-based approaches, and factor models.
result Developed mathematical and statistical approaches to estimate and assess redemption shocks.
Neural networks assess asset-liability risk over time.
problem Challenging valuation of portfolios with complex products.
method Neural network approach for conditional portfolio valuation.
result Effective risk assessment for banking and insurance portfolios.
The study examines how limited liability and haircut affect a bank's loan portfolio's liquidity risk.
problem Impact of limited liability and haircut on a bank's loan portfolio's liquidity risk.
method Constructed a novel loan portfolio model with limited liability and haircut constraint, analyzed at three time steps.
result Model with haircut constraint leads to lesser liquidity risk.
We price a contingent claim liability using the utility indifference argument. We consider an agent with exponential utility, who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of positive proportional transaction cost in two c…
A new method for clearing liability networks using sheaves on directed hypergraphs.
problem Clearing in liability networks using a novel mathematical approach.
method Associate a liability sheaf on a directed hypergraph to a liability network, identifying clearing configurations as global sections of this sheaf.
result Clearing configurations are precisely the global sections of the sheaf, and the sheaf construction is functorial under change of coefficient category.
Study optimizes insurance liability cash flows with regulatory capital requirements.
problem Valuation of insurance liabilities under regulatory capital constraints.
method Multiple-prior optimal stopping theory applied to insurance liabilities, considering hypothetical transfer and repeated capital requirements.
result Proposes a valuation functional for non-replicable cash flows, incorporating a margin for regulatory capital considerations.
We introduce a generic model for spouse's pensions. The generic model allows for the modeling of various types of spouse's pensions with payments commencing at the death of the insured. We derive abstract formulas for cashflows and liabilities corresponding to common types of spouse's pensions. We show how the standard…
Study introduces new methods to estimate equity and liability required rates of return.
problem Estimating the required rates of return for equity and liabilities of companies.
method Used maximum likelihood, Bayesian, Kalman filtering, and market value evaluation methods.
result The new methods can accurately estimate the required rates of return.
Developed Merton's model for public companies using observed liabilities.
problem Estimating default risk for public companies.
method Campbell and Shiller's approximation method for risk-neutral values and default probabilities.
result Formulas and ML estimators for public companies' default probabilities.
Mean-field approximations simplify insurance liability calculations.
problem High-dimensional system of equations makes insurance liability calculation infeasible.
method Use mean-field model to replace high-dimensional system with a low-dimensional non-linear system.
result Insurance liability converges to mean-field approximation as cohort size increases.
We numerically study an Asset Liability Management problem linked to the decommissioning of French nuclear power plants. We link the risk aversion of practitioners to an optimization problem. Using different price models we show that the optimal solution is linked to a de-risking management strategy similar to a concav…
Identifying systemically important companies in the entire liability network of a small open economyq-fin.RM
To a large extent, the systemic importance of financial institutions is related to the topology of financial liability networks. In this work we reconstruct and analyze the - to our knowledge - largest financial network that has been studied up to now. This financial liability network consists of 51,980 firms and 796 b…
Proposes a bond portfolio solution for managing interest rate risk.
problem Managing long-term assets and liabilities under interest rate risk.
method Proposes a bond portfolio solution based on ambiguity-averse preferences, accommodating various constraints and interest rate perturbations.
result Optimal portfolio can be computed as a simple generalized least squares problem, enhancing out-of-sample performance.
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory frameworks, the approach presented is based on a hypothetical transfer of the original li…
Study on price formation among investors with exponential utility and liabilities.
problem Equilibrium price formation among investors with heterogeneous risk-averseness and liabilities.
method Mean-field game theory and mean-field backward stochastic differential equations (BSDE).
result Existence of equilibrium risk-premium process and market clearing in the large population limit.
Optimal wealth strategy derived for jump-diffusion models with liabilities.
problem Maximizing utility in jump-diffusion models with random liabilities.
method Forward Backward SDEs system for optimal strategy.
result Explicit results for pure jump model and exponential utilities.
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the difference between assets and liabilities of the bank. A bank is solvent when its capit…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is fixed. Then the residual cash flow is managed by repeated one-period replicatio…
New method for insurance valuation combining hedging and risk minimization.
problem Current insurance valuation methods do not reflect regulatory risk measures.
method Two-step hedging procedure using generalised regression.
result The method produces portfolios neutral to risk measures like VaR or expectiles.
Study optimal strategies for insurer's dividends, investments, and liabilities.
problem Maximize insurer's utility of dividend payments over an infinite horizon.
method Perturbation approach to obtain optimal strategy and value function in closed form.
result Obtained optimal strategy and value function for log and power utility.
Paper proposes a RL approach for ALM with superior performance.
problem Dynamic asset-liability management in financial markets.
method Continuous-time RL with LQ formulation, policy gradient, adaptive and scheduled exploration.
result Method outperforms traditional and state-of-the-art RL algorithms in ALM.
Liquidity Stress Testing in Asset Management -- Part 3. Managing the Asset-Liability Liquidity Riskq-fin.RM
Third part of a study on liquidity risk in asset management, focusing on managing the asset-liability liquidity risk.
problem Managing the asset-liability liquidity risk in asset management.
method Develops a methodological and practical framework for liquidity stress testing programs.
result Proposes measurement, management, and monitoring tools for controlling the liquidity gap.
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities which incorporates the Solvency II approach as a special case. The proposed fram…
Efficient solution of structural default models with correlated jumps and mutual obligationsq-fin.CP
The structural default model of Lipton and Sepp, 2009 is generalized for a set of banks with mutual interbank liabilities whose assets are driven by correlated Levy processes with idiosyncratic and common components. The multi-dimensional problem is made tractable via a novel computational method, which generalizes the…
In this paper we investigate novel applications of a new class of equations which we call time-delayed backward stochastic differential equations. Time-delayed BSDEs may arise in finance when we want to find an investment strategy and an investment portfolio which should replicate a liability or meet a target depending…
On the surplus management of funds with assets and liabilities in presence of solvency requirementsmath.OC
The paper optimizes dividend strategies for companies with assets and liabilities under solvency constraints.
problem Maximizing dividends while adhering to solvency requirements in the face of correlated asset and liability movements.
method Developed verification lemmas to show optimal barrier dividend strategies in two cases: with and without shareholder funding.
result Optimal dividend strategies are barrier-type, derived in closed form and illustrated.
Extends Black model to include commodities with potential negative prices.
problem Modeling commodities with the possibility of negative prices due to delivery failures.
method Integrates a `delivery liability' option into the Black model.
result Validates the approach through a simple generalization of the Black model.
Paper solves investment and consumption problem with unknown risk, providing explicit solutions.
problem Solving consumption-investment problem with unknown market price of risk and terminal liability constraint.
method Introduced a coupled forward-backward stochastic differential equation (FBSDE) and provided an explicit solution.
result Explicit expressions for optimal investment strategy and value function derived.
The paper introduces ESE scores for farmers to assess climate change risks.
problem Assessing climate change risks in individual farmers' credit evaluations.
method Integrating ESG variables into joint liability models and using a mean-variance utility function.
result Optimal group sizes and individual-ESE score relationships under various climatic conditions.
Elimination of systemic risk in financial networks by means of a systemic risk transaction taxq-fin.RM
Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes represent financial institutions, and links capture the size and maturity of assets (l…
A framework tackles model uncertainty in ALM, providing robust investment strategies.
problem Model uncertainty in asset liability management (ALM).
method Wasserstein barycenter approach to handle various information sources and uncertainties.
result The proposed framework selects robust investment portfolios that remain optimal under various uncertainties.
India introduces NPS to manage pension liabilities and promote savings.
problem Managing pension liabilities and promoting savings among employees.
method Comparative analysis of NPS and OPS, addressing stakeholder claims.
result NPS reduces government pension liabilities and promotes disciplined saving.