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題名 Valuation and Hedging of Limited Price Indexation (LPI) Liability
作者 黃泓智
Huang,H.-C.;Cairns,A.J.G
關鍵詞 LPI Liability; Static Hedging; Regular Rebalancing; Dynamic Hedging; Risk Minimising Hedging
日期 2004
上傳時間 18-十月-2010 00:53:31 (UTC+8)
摘要 This paper considers the market or economic valuation and the hedging of Limited Price Indexed (LPI) liabilities. This involves finding optimal static and dynamic hedging strategies which minimise the riskiness of the investment portfolio relative to the liability.
     In this paper we do not aim to find the perfect hedge in a perfect world. Instead, it is assumed that optimisation is restricted to three commonly used asset classes in pension funds: cash; long-term (or irredeemable) fixed-interest bonds; and long-dated index-linked bonds. The economic value of the liability is then defined as the value of the best matching portfolio using a mean/variance type of loss function. Specifically, we adopt the risk minimising approach of Föllmer & Sondermann (1986) and Schweizer & Föllmer (1988). Even with such a simple loss function, establishing the theoretically optimal solution can be difficult. We propose that a practical solution close to the theoretical optimum can be found using two approximations. First, we approximate the ‘true’ stochastic economic model by a vector autoregressive model of order one. Second, we use a sequence of linearisations to approximate non-linear by straightforward quadratic minimisation problems.
     The proposed approach is illustrated with various numerical examples, and we compare the results of the approximately optimal hedging strategy with static strategies.
關聯 British Actuarial Journal,10(3), 627-663
資料類型 article
DOI http://dx.doi.org/10.1017/S1357321700002713
dc.creator (作者) 黃泓智zh_TW
dc.creator (作者) Huang,H.-C.;Cairns,A.J.G-
dc.date (日期) 2004-
dc.date.accessioned 18-十月-2010 00:53:31 (UTC+8)-
dc.date.available 18-十月-2010 00:53:31 (UTC+8)-
dc.date.issued (上傳時間) 18-十月-2010 00:53:31 (UTC+8)-
dc.identifier.uri (URI) http://nccur.lib.nccu.edu.tw/handle/140.119/47219-
dc.description.abstract (摘要) This paper considers the market or economic valuation and the hedging of Limited Price Indexed (LPI) liabilities. This involves finding optimal static and dynamic hedging strategies which minimise the riskiness of the investment portfolio relative to the liability.
     In this paper we do not aim to find the perfect hedge in a perfect world. Instead, it is assumed that optimisation is restricted to three commonly used asset classes in pension funds: cash; long-term (or irredeemable) fixed-interest bonds; and long-dated index-linked bonds. The economic value of the liability is then defined as the value of the best matching portfolio using a mean/variance type of loss function. Specifically, we adopt the risk minimising approach of Föllmer & Sondermann (1986) and Schweizer & Föllmer (1988). Even with such a simple loss function, establishing the theoretically optimal solution can be difficult. We propose that a practical solution close to the theoretical optimum can be found using two approximations. First, we approximate the ‘true’ stochastic economic model by a vector autoregressive model of order one. Second, we use a sequence of linearisations to approximate non-linear by straightforward quadratic minimisation problems.
     The proposed approach is illustrated with various numerical examples, and we compare the results of the approximately optimal hedging strategy with static strategies.		-
dc.language zh_TWen
dc.language.iso en_US-
dc.relation (關聯) British Actuarial Journal,10(3), 627-663en
dc.subject (關鍵詞) LPI Liability; Static Hedging; Regular Rebalancing; Dynamic Hedging; Risk Minimising Hedging-
dc.title (題名) Valuation and Hedging of Limited Price Indexation (LPI) Liabilityen
dc.type (資料類型) articleen
dc.identifier.doi (DOI) 10.1017/S1357321700002713en_US
dc.doi.uri (DOI) http://dx.doi.org/10.1017/S1357321700002713 en_US