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Asset Liability Management for Perpetual Payments
Abstract
The Financial Immunization Classic Theory studies the interest rate risk and the necessary conditions to asset liability management. Redington, in 1952, introduced a model of asset liability management. His model considers the initial financial struture, the shifts of the interest rate function represented by z, for z 2 R, which is added to the initial financial structure, determining the new financial structure. Fisher and Weil, in 1971, studied the case in which the liability is given by a single payment L. The present work considers the value function v(t; s) as known, and includes the case of discontinuous interest rates function. The theorems of Redington and Fisher-Weil are extended to a sequence of asset and liability cash flows for constant shifts.
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