The Asset-Liability Management Compound Option Model : A Public Debt Management Tool

This paper describes a novel approach to asset-liability management of public debt schemes, the asset-liability compound option approach. This approach integrates standard asset-liability analysis with the option approach to model contingent liabilities. Furthermore, the paper also introduces a new measure for debt repayment capacity that is consistent with the definitions of the government balance sheet and net worth as presented in the 2001 IMF Government Finance Statistics