Abstract
The article describes an approach to asset–liability modeling using discrete time stochastic linear programming. The model uses future scenarios and optimizes the asset–liability mix subject to various constraints and is applicable to insurance companies, bank trading departments, overall bank asset–liability management, and other financial institutions. An application to the Siemens Austria pension fund, where the model has been in use since 2000, is described. The model has had considerable success and has been used by regulators to determine the effect of various possible pension fund policy changes. It has also been used by pension fund advisors who deal with uncertain assets and liabilities subject to various legal and policy constraints.
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