In the past, when deciding the asset allocation, fund managers only concerned the factors of assets. This incomplete way may let pension funds not cover their liabilities. To solve this problem we integrate the factors which influence fund¡¦s assets and liabilities and focus on surplus, which means assets minus liabilities. We use Surplus Optimization Model and Immunization Theory to construct our Liability Driven Investment and Dual Duration Matching Model. We decompose duration to real interest rate duration and inflation rate duration to control the sources of interest rate. Through this method, we can enhance the efficiency of asset allocation to ensure paying pension annuity punctually and avoid the risk of interest rate.
Our sample period is Sept. 2001 to Aug. 2005 and sampling frequency is monthly. We use the common investment tools, stocks index, government bond index, 5 years corporate bonds, 3 years bank deposit, 30 days commercial papers, to be the assets we can allocate.
We discover that when using liability driven investment and duration matching the longer years we consider the longer assets duration we need. Because government bond index¡¦s duration is shorter than stocks index¡¦s. When we consider longer years the weight of government bond index will decrease and the weight of stocks index will increase. When considered years are 50, the weight of government bond index is 54.74% and the weight of stocks index is 45.26%. The ratio of equity assets to fixed income assets is 84.51% that is similar with pension fund¡¦s ratio, 86.13%. No matter how many years we consider, the weight of bonds is high. But in pension funds¡¦ target allocation the weight of bonds is only 16% and the weights of bank deposit and T-bills are 31%. To take immunization strategy and improve the long term revenue, a large proportion should be allocated from bank deposit and T-bills to bonds.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0706106-165427 |
| Date | 06 July 2006 |
| Creators | Hsieh, Pei-fang |
| Contributors | none, Yih Jeng, none |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0706106-165427 |
| Rights | withheld, Copyright information available at source archive |
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