Abstract

Preference-Based Asset Liability Management

M.C. Janssen, U. Lüthi, W. Neuenschwander and P. Vanini

Universität Zürich

Asset and liability management (ALM) for private investors is a demanding task, since a proper management process is based on advanced economic theory, finance and optimization theory. The goal of the present paper is to present an approach close to economic theory solely based on observable information provided by investors. That is, a main goal is to determine the investor's preferences and risk preferences. The approach proposed is novel since liabilities and assets are given their full weight in the process and the number of liabilities and assets is not restricted. The resulting dynamic optimization problems are analyzed and examples highlight the features of the
model.