This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach...

Estimation errors in the inputs are the main problem when applying portfolio analysis, and Markov regime switching models have been shown to reduce these errors. We investigate whether the use of two regime models remains superior across a range of values of risk aversion and transaction costs,...

For various organizational reasons, large investors typically split their portfolio decision into two stages - asset allocation and stock selection. We hypothesise that mean-variance models are superior to equal weighting for asset allocation, while the reverse applies for stock selection, as...