Article ID: | iaor19941494 |
Country: | United States |
Volume: | 24 |
Issue: | 1 |
Start Page Number: | 29 |
End Page Number: | 49 |
Publication Date: | Jan 1994 |
Journal: | Interfaces |
Authors: | Ziemba William T., Turner Andrew L., Carino David R., Kent Terry, Myers David H., Stacy Celine, Sylvanus Mike, Watanabe K. |
Keywords: | optimization |
Frank Russell Company and The Yasuda Fire and Marine Insurance Co., Ltd., developed an asset/liability management model using multistage stochastic programming. It determines an optimal investment strategy that incorporates a multiperiod approach and enables the decision makers to define risks in tangible operational terms. It also handles the complex regulations imposed by Japanese insurance laws and practices. The most important goal is to produce a high-income return to pay annual interest on savings-type insurance policies without sacrificing the goal of maximizing the long-term wealth of the firm. During the first two years of use, fiscal 1991 and 1992, the investment strategy devised by the model yielded extra income of 42 basis points (ℝY8.7 billion or U.S.$79 million).