Dynamic Asset Liability Management

Abstract

Asset liability management is concerned with optimal investment strategies and financing policies for investment funds that have to meet financial obligations. This includes the financial planning problems of pension funds, banks and insurance companies, which face the daily task of managing billions of dollars of retirement savings, deposits and insurance premia. It is clear that the assets of these financial institutions should eventually be sufficient to meet their liabilities. The importance of asset liability management for the economy can therefore hardly be underestimated, as it involves the payment of pensions, loans and insurance contracts. In order to give an impression of the amounts at stake, we report the balance sheet of the joint Dutch pension funds in 1997.