Optimal asset allocation subject to withdrawal risk and solvency constraints

Artikel

This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor's asset allocation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Risks ; ISSN: 2227-9091 ; Volume: 10 ; Year: 2022 ; Issue: 1 ; Pages: 1-28 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: asset allocation ; asset-liability management ; withdrawal risk ; liquidity risk ; utility maximization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cousin, Areski ; Jiao, Ying ; Robert, Christian Yann ; Zerbib, Olivier David
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2022

Further information

• DOI: doi:10.3390/risks10010015
• Handle: http://hdl.handle.net/10419/258326
• Last update: 10.03.2025, 11:44 AM CET