Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258326 
Year of Publication: 
2022
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 10 [Issue:] 1 [Article No.:] 15 [Publisher:] MDPI [Place:] Basel [Year:] 2022 [Pages:] 1-28
Publisher: 
MDPI, Basel
Abstract: 
This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor's asset allocation.
Subjects: 
asset allocation
asset-liability management
withdrawal risk
liquidity risk
utility maximization
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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