SUMMARY

• Leading practitioners, consultant and academics have been brought together to develop a unique insight that will enable the reader to develop an enhanced understanding and competency of ALM and the surrounding issues

• Covers pension finance, foundations, actuarial mathematics, fair valuation of pension liabilities including optionalities, scenario simulation and portfolio optimisation

• A non-technical approach combined with the use of practical examples throughout offers a thorough understanding of the subject matter to those of a non-quantitative background as well as decision makers and corporates

• This volume is a total representation of the subject matter that cannot be found anywhere else in one title and includes a selection of topics that are at the heart of today's best practice in ALM

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  TABLE OF CONTENTS

CONTENTS
Introduction: Rethinking Asset Management: Consequences of the Pension Crisis

PART 1: FOUNDATIONS

1 Fair Value of Liabilities: The Financial Economics Perspective
David F. Babbel of The Warton School, University of Pennsylvania, Jeremy Gold of Jeremy Gold Pensions and Craig B. Merrill of Brigham Young University

2 A Modern Perspective on Institutional Investment Policy
Jon Exley of Mercer Investment Consulting

3 Pension Mathematics in Actuarial Science
Alfred Kussmaul and Reiner Schwinger of Rauser AG

PART 2: VALUATION

4 An Analysis of the Hedging Approach to Modelling Pension Fund Liabilities
John Randall of Birkbeck College and Stephen Satchell of Cambridge University

5 Approximating Corporate Liabilities
Thomas Jasper of Rauser AG and Bernd Scherer of Deutsche Bank

6 Market Risk and Credit Risk of Old-age Security Systems
Markus Rudolf of WHU Otto Beisheim Graduate School of Management

7 An Introduction to the Fair Valuation of Life Insurance Liabilities
David Prieul and Vladislav Putyatin of Deutsche Bank

8 State-price Deflators
Stuart Jarvis of Hewitt Bacon & Woodrow, Frances Southall and Elliot Varnell of Deloitte & Touche

9 Option Pricing with Deflators
Andrew D. Smith of Deloitte & Touche

PART 3: SIMULATION

10 Simulation for the Long Run
Roy P. M. M. Hoevenaars of ABP Investments and Maastricht University, Roderick D. J. Molenaar of ABP Investments and Tom B. M. Steenkamp of ABP Investments and Vrije University of Amsterdam

11 Economic Cascade Models
Elke Eberts of University for Applied Science of the Federal Institute, Mannheim and Raimond Maurer of Johann Wolfgang Goethe Univeristy, Frankfurt

12 Vector Autoregression Modelling Tools for Asset Liability Management
Norman R. Swanson of Rutgers University and DFA Capital Management, Inc., Joseph R. Fairchild of Faircorp Inc. and Hal W. Pedersen of University of Manitoba

PART 4: OPTIMISATION

13 Portfolio Optimisation with Drawdown Constraints
Alexei Chekhlov, Stanislav Uryasev and Michael Zabarankin of University of Florida

14 A Hybrid Simulation / Tree Stochastic Optimisation Model for Dynamic Asset Allocation
Norio Hibiki of Keio University

15 Asset Liability Management using Stochastic Programming
Mehndi Pirbhai of CARISMA (Brunel University), Gautam Mitra of CARISMA (Brunel University) and OptiRisk Ltd; and Triphonas Kyriakis of Analytics Ltd

16 Asset Liability Management Modelling using Multistage Mixed-integer Stochastic Programming
Sibrand J. Drijver, Willem K. Klein Haneveld and Maarten H. van der Vlerk of University of Groningen, The Netherlands

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  AUTHOR BIOGRAPHY

Dr Bernd Scherer is Managing Director and Global Head of Quantitative GTAA Products at Morgan Stanley Investment Management, where he is responsible for the creation of active investment strategies within commodities, foreign exchange, credit and equity markets. Before joining Morgan Stanley he has been Head of Quantitative Research and Head of Portfolio Engineering at Deutsche Asset Management in New York. During his 14-year career in asset management he has held various positions at Morgan Stanley, Oppenheim Investment Management Schroders and JP Morgan Investment Management. Dr Scherer's current research interests focus on signal construction, asset pricing and portfolio optimisation. He has written four books and more than 40 publications in the Journal of Portfolio Management, Financial Analysts Journal, Journal of Investment Management, Risk, Financial Markets and Portfolio Management, Journal of Asset Management etc. Bernd is visiting professor at Birkbeck College and external advisor to the Swiss Finance Institute.

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  CONTRIBUTORS

David F. Babbel of The Warton School, University of Pennsylvania, Jeremy Gold of Jeremy Gold Pensions and Craig B. Merrill of Brigham Young University; Jon Exley of Mercer Investment Consulting; Alfred Kussmaul and Reiner Schwinger of Rauser AG; John Randall of Birkbeck College and Stephen Satchell of Cambridge University; Thomas Jasper of Rauser AG and Bernd Scherer of Deutsche Bank; Markus Rudolf of WHU Otto Beisheim Graduate School of Management; David Prieul and Vladislav Putyatin of Deutsche Bank; Stuart Jarvis of Hewitt Bacon & Woodrow, Frances Southall and Elliot Varnell of Deloitte & Touche; Andrew D. Smith of Deloitte & Touche; Roy P. M. M. Hoevenaars of ABP Investments and Maastricht University, Roderick D. J. Molenaar of ABP Investments and Tom B. M. Steenkamp of ABP Investments and Vrije University of Amsterdam; Elke Eberts of University for Applied Science of the Federal Institute, Mannheim and Raimond Maurer of Johann Wolfgang Goethe Univeristy, Frankfurt; Norman R. Swanson of Rutgers University and DFA Capital Management, Inc., Joseph R. Fairchild of Faircorp Inc. and Hal W. Pedersen of University of Manitoba; Alexei Chekhlov, Stanislav Uryasev and Michael Zabarankin of University of Florida; Norio Hibiki of Keio University; Mehndi Pirbhai of CARISMA (Brunel University), Gautam Mitra of CARISMA (Brunel University) and OptiRisk Ltd; Triphonas Kyriakis of Analytics Ltd; Sibrand J. Drijver, Willem K. Klein Haneveld and Maarten H. van der Vlerk of University of Groningen, The Netherlands
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