Vanilla option replication for ALM shortfall risk

Technical papers

In the midst of ongoing risk management improvements in the life and pensions sector, hedging strategies to address asset-liability management (ALM) issues have been pursued via commonly used liability replicating techniques. For many of the life and pensions products, precise or static hedging would require the use of exotic, bespoke and highly illiquid instruments to mimic the exact liability behaviour, making such an approach largely impractical and theoretical in nature.

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