Asset and Liability Management

In this chapter, we consider the situation of an investor who manages a portfolio of assets partly funded by an external liability. This is the typical case for banks, insurance companies and hedge funds. Asset and liabilitymanagement (ALM) problems have generated a substantial literature and a diversity of approach such as stochastic control (see Rudolf and Ziemba (2004), and references therein), stochastic programming (Ziemba and Mulvey, 1998; Ziemba, 2003) and single-period optimization (Scherer, 2005)…