T. Gerstner, M. Griebel, M. Holtz, R. Goschnick, and M. Haep.
A general asset-liability management model for the efficient
simulation of portfolios of life insurance policies.
Insurance: Math. Economics, 42(2):704-716, 2008.
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New regulations and a stronger competition have increased the importance of stochastic asset-liability management models for insurance companies in recent years. In this paper, we propose a discrete time asset-liability management model for the simulation of simplified balance sheets of life insurance products. The model incorporates the most important life insurance product characteristics, the surrender of contracts, a reserve-dependent surplus declaration, a dynamic asset allocation and a two-factor stochastic capital market. All arising terms in the model can be calculated recursively which allows an easy implementation and efficient simulation. Furthermore, the model is designed to have a modular organisation which permits straightforward modifications and extensions to handle specific requirements. In a sensitivity analysis for example portfolios and parameters we investigate the impact of the most important product and management parameters on the risk exposure of the insurance company and show that the model captures the main behaviour patterns of the balance sheet development of life insurance products.