Asset-Liability Management for Pension Funds in a Time-Varying Volatility Environment

In this paper we develop a framework for asset-liability management for pension funds in a time-varying volatility environment. We use sophisticated dynamic econometric models for the variances-covariances of the asset classes in which the pension fund is investing, while keeping the liability structure simple and standard. The models implemented are used in the asset allocation process of the pension fund and for risk management. The proposed models are shown to have significant economic value using well-known performance measures