INFORMS Journal on Applied Analytics · 2000 · 95 citations · 4 references
ManagementInsuranceRisk ManagementActuarial ScienceFinancial Risk ManagementInvestment ManagementAsset ManagementAsset-liability ManagementFinancial RiskInvestment TheoryLiability-driven InvestingRisk AllocationAsset-liability Management ReportingAsset-liability ValuationCapital Market TheoryIntegrated Asset-liability OptimizationLiability Management OperationsStochastic Asset-liability ManagementStochastic Liability ModelingStochastic Scenario Analysis
Towers Perrin-Tillinghast employs a stochastic asset-and-liability management system for helping its pension plan and insurance clients understand the risks and opportunities related to capital market investments and other major decisions. The system has three major components: (1) a stochastic scenario generator (CAP:Link); (2) a nonlinear optimization simulation model (OPT:Link); and (3) a flexible liability- and financial-reporting module (FIN:Link). Each part improves over existing technology as compared with traditional actuarial approaches. The integrated investment system links asset risks to liabilities so that company goals are best achieved. For example, US WEST saved $450 to $1,000 million in opportunity costs in its pension plan by following the advice of the asset-and-liability system.
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