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Immunization strategies for funding multiple inflation-linked retirement income benefits

2021-04-01Artigo científico Acesso aberto
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dc.contributor.authorSimões, Cláudia
dc.contributor.authorOliveira, Luís
dc.contributor.authorBravo, Jorge M.
dc.contributor.institutionInformation Management Research Center (MagIC) - NOVA Information Management School
dc.contributor.institutionNOVA Information Management School (NOVA IMS)
dc.contributor.pblMDPI - Multidisciplinary Digital Publishing Institute
dc.date.accessioned2021-04-19T22:43:38Z
dc.date.available2021-04-19T22:43:38Z
dc.date.issued2021-04-01
dc.descriptionSimões, C., Oliveira, L., & Bravo, J. M. (2021). Immunization strategies for funding multiple inflation-linked retirement income benefits. Risks, 9(4), [60]. https://doi.org/10.3390/risks9040060
dc.description.abstractProtecting against unexpected yield curve, inflation, and longevity shifts are some of the most critical issues institutional and private investors must solve when managing post-retirement income benefits. This paper empirically investigates the performance of alternative immunization strategies for funding targeted multiple liabilities that are fixed in timing but random in size (inflation-linked), i.e., that change stochastically according to consumer price or wage level indexes. The immunization procedure is based on a targeted minimax strategy considering the M-Absolute as the interest rate risk measure. We investigate to what extent the inflation-hedging properties of ILBs in asset liability management strategies targeted to immunize multiple liabilities of random size are superior to that of nominal bonds. We use two alternative datasets comprising daily closing prices for U.S. Treasuries and U.S. inflation-linked bonds from 2000 to 2018. The immunization performance is tested over 3-year and 5-year investment horizons, uses real and not simulated bond data and takes into consideration the impact of transaction costs in the performance of immunization strategies and in the selection of optimal investment strategies. The results show that the multiple liability immunization strategy using inflation-linked bonds outperforms the equivalent strategy using nominal bonds and is robust even in a nearly zero interest rate scenario. These results have important implications in the design and structuring of ALM liability-driven investment strategies, particularly for retirement income providers such as pension schemes or life insurance companies.en
dc.description.versionpublishersversion
dc.description.versionpublished
dc.format.extent28
dc.format.extent1210057
dc.identifier.doi10.3390/risks9040060
dc.identifier.issn2227-9091
dc.identifier.otherPURE: 29276303
dc.identifier.otherPURE UUID: 3ce668cd-b997-4b0d-8517-2f56f9a49fdd
dc.identifier.otherScopus: 85103854441
dc.identifier.otherORCID: /0000-0002-7389-5103/work/92527708
dc.identifier.otherWOS: 000643602000001
dc.identifier.urihttp://hdl.handle.net/10362/115824
dc.identifier.urlhttps://www.scopus.com/pages/publications/85103854441
dc.identifier.urlhttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcAuth=Alerting&SrcApp=Alerting&DestApp=WOS_CPL&DestLinkType=FullRecord&UT=WOS:000643602000001
dc.language.isoeng
dc.peerreviewedyes
dc.subjectDuration
dc.subjectImmunization
dc.subjectInflation risk
dc.subjectInterest rate risk
dc.subjectLife insurance
dc.subjectM-Absolute
dc.subjectPensions
dc.subjectAccounting
dc.subjectEconomics, Econometrics and Finance (miscellaneous)
dc.subjectStrategy and Management
dc.titleImmunization strategies for funding multiple inflation-linked retirement income benefitsen
dc.typejournal article
degois.publication.firstPage1
degois.publication.issue4
degois.publication.lastPage28
degois.publication.titleRisks
degois.publication.volume9
dspace.entity.typePublication
rcaap.rightsopenAccess

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