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Isaac Newton Institute for Mathematical Sciences

City Event "Modelling Philosophy"

Modelling Incomplete Markets For Long Term Asset Liability Management

Author: MAH Dempster (Judge Institute)


After evaluating the strengths and weaknesses of alternative models for real world probabilities in real (incomplete) markets with unpriced uncertainties, this talk will report on current progress of the structural economic/capital market approach to asset class returns pioneered by Wilkie (1986) for this situation. This flexible approach is a natural complement to the use of dynamic stochastic programming (DSP) techniques for solving long term asset liability problems for pension, insurance and hedge fund management. A brief overview of DSP techniques will be followed by some illustrative real world case studies.