Liability-Relative Investing

The Strategic and Tactical Value of Commodity Futures

“…In a forward-looking optimization, the liability-hedging credit should be added to an asset's forward-looking arithmetic expected return. Waring (2004) pointed out that liabilities can be nominal (not adjusted for inflation) or real (adjusted for inflation). Figure 7 illustrates the ambiguity involved in estimating the value of commodity futures in a liability-focused setting.…”

Hedging Long-Duration Liabilities with LeveredShort-Duration Bonds

“…Bostock, Woolley, and Duffy [1989] develop an asset allocation rule of thumb for duration matching based on the specific properties of the pension scheme. Waring [2004] emphasizes the real and inf lation sensitivities of plan liabilities and describes how plans can use a combination of nominal bonds and TIPS to match these dual durations. And, more recently, Adams and Smith [2009] discuss how plans can use interest rate overlays to facilitate duration matching.…”

Strategic asset allocation for a country: the Norwegian case

“…Two streams may have the same durations, but different market risk, see Santa-Clara (2004). The optimal mix of those two assets that best matches the pension liability is β pl,t Both Leibowitz et al (1989) and Waring (2004) use estimates on a real interest rate duration of 20 years and an inflation duration of 4 years. 29 I use the same figures for the real interest rate duration for stocks, D s,r = 20, and inflation duration, D s,π = 4.…”

“…follow international economic cycles. 28 For a further discussion of estimating these durations, check Leibowitz et al (1989) and Waring (2004). The concept of dual duration was first introduced by Leibowitz et al (1989).…”