Optimal Portfolio Selection and Asset-Liability Management

In this book we face the problems of the optimal portfolio selection and asset- liability management, with constraints and transaction costs. In the basic problem, the portfolio manager has to manage an initial investment A0 until a fixed maturity T > 0. The manager is free to choose how to invest the money among a number of available assets and can periodically modify the portfolio composition, but has to satisfy several constraints both of endogenous and exogenous nature. Furthermore, each allocation change entails transaction costs, since it implies selling part of an asset to provide either liquidity or a different asset. The company manages the investments to achieve a number of goals, the most important of which is to meet its obligations towards the policy-holders.