Abstract: In this paper we present an optimization framework that deals with the asset-liability portfolio selection problem. We consider a financial institution that has multiple lines of business. The capital allocation is obtained by minimizing the sum of the expected squared differences between the liability in each line of business and the value of the corresponding investment portfolio. First we study this problem without any constraints and after that we impose the aggregate required capital. The main results refer to the bottom-up approach and we show when its optimal investment portfolio equivalents to the one that obtain in the top-down approach.
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: article
Indexed In: ['crossref']
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