Optimal asset allocation in asset liability management
By: Jules H. van Binsbergen, Michael W. Brandt.
Contributors: Binsbergen, Jules H. van.; Michael W. Brandt.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 12970; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12970.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We study the impact of regulations on the investment decisions of a defined benefits pension plan.  We assess the influence of ex ante (preventive) and ex post (punitive) risk constraints on the gains to dynamic, as opposed to myopic, decision making.  We find that preventive measures, such as Value-at-Risk constraints, tend to decrease the gains to dynamic investment.  In contrast, punitive constraints, such as mandatory additional contributions from the sponsor when the plan becomes underfunded, lead to very large utility gains from solving the dynamic program.  We also show that financial reporting rules have real effects on investment behavior.  For example, the current requirement to discount liabilities at a rolling average of yields, as opposed to at current yields, induces grossly suboptimal investment decisions"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/18/2007.

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