EDHEC-Risk Researchers Win Top Prize at Quantitative Investment Research (Inquire) Europe

They have written a paper on this topic, “Measuring the Benefits of Dynamic Asset Allocation Strategies in the Presence of Liability Constraints.” The paper’s abstract notes that: “The recent pension crisis has triggered a fierce debate in most developed countries between advocates of a tighter regulation designed to provide explicit incentives for pension funds to increase their focus on risk management, and those arguing that imposing short-term funding constraints and solvency requirements on such long-term investors would only increase the cost of pension financing. We analyse this question in the context of a formal continuous-time dynamic asset allocation model for an investor facing liability commitments subject to inflation and interest rate risks. In an empirical exercise, we find that the presence of short-term funding ratio constraints indeed involves a positive welfare cost, but that cost is not found to be prohibitive for reasonable parameter values.”

EDHEC-Risk Institute is part of EDHEC Business School, based in Singapore, Nice and London.

Comments? Please send them to [email protected]. Kate McBride, AIF^(R) is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.