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Why Asset and Liability Management (ALM)?

A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.
- Mark Twain.

Secular Bear Market in stock market along with the falling interest rates in most parts of the world resulted in depleting surpluses at best and in many cases burned holes in many pension kitties. As the life expectancy has been going up, managers of pension fund schemes are losing sleep over the possibility of the fund running out of money to pay for the obligations. Financial market shocks such as the '98 Asian Crisis and the recent sub-prime crisis in US and some European Countries brought to light the dark side of systematic risk, in general and credit risk, in particular.

As corporate treasurers, fund managers in the pension and insurance industry, or as analysts who support Asset & Liability Management (ALM) models in different financial institutions, do you have the right tools and systems in place to help you manage such risk? Are the established techniques adequate in ever changing financial landscape, where new and complex financial instruments are introduced regularly?

The key to successful Asset & Liability Management is to understand the uncertainties in return on and of investments (Asset side) and the uncertainties in the amount and the duration of payouts (Liability Side). The tools of yesteryears fall short of managing the assets and liabilities under uncertainties. OptiRisk offers 'bespoke' Decision Support System (DSS) that uses Stochastic Programming Solver (Software tool to solve optimization problems under uncertainties) to solve Asset and Liability Management (ALM) of pension funds, insurance, annuities, etc. This DSS takes into account various uncertainties underpinning the Asset Liability Management by considering sets of scenarios (of both assets and liabilities) for the duration of funds and computes the best possible investment management decisions.