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 JMF  Vol.3 No.3 , August 2013
A Liability Tracking Approach to Long Term Management of Pension Funds
Abstract: We propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the liability by directly tracking a benchmark process which represents the liability. Two numerical results using empirical data published by Japanese organizations are served: simulations tracking an artificial liability and an estimated liability of Japanese organization. The latter one demonstrates that our optimal portfolio strategy can hedge his or her liability.
Cite this paper: M. Ieda, T. Yamashita and Y. Nakano, "A Liability Tracking Approach to Long Term Management of Pension Funds," Journal of Mathematical Finance, Vol. 3 No. 3, 2013, pp. 392-400. doi: 10.4236/jmf.2013.33040.
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