Abstract
This paper studies optimal investment from the point of view of an investor with longevity-linked liabilities. The relevant optimization problems rarely are analytically tractable, but we are able to show numerically that liability driven investment can significantly outperform common strategies that do not take the liabilities into account. In problems without liabilities the advantage disappears, which suggests that the superiority of the proposed strategies is indeed based on connections between liabilities and asset returns.
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Notes
- 1.
More precisely, D t is assumed \(\mathcal{F}_{t}\)-measurable, i.e. \(\{\omega \in \varOmega \,\vert \,D_{t}(\omega ) \cap U\neq \emptyset \} \in \mathcal{F}_{t}\) for every open U.
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Aro, H., Pennanen, T. (2017). Liability-Driven Investment in Longevity Risk Management. In: Consigli, G., Kuhn, D., Brandimarte, P. (eds) Optimal Financial Decision Making under Uncertainty. International Series in Operations Research & Management Science, vol 245. Springer, Cham. https://doi.org/10.1007/978-3-319-41613-7_5
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