Stavros A. Zenios
Endowments with a minimum guaranteed rate of return appear in insurance policies, pension plans and social security plans. In several cases, especially in the insurance industry, such endowments also participate in the business and receive bonuses from the firm’s asset portfolio. In this paper we develop a scenario based stochastic optimization model for asset and liability management of participating insurance policies with guarantees. The model allows the analysis of the trade offs facing an insurance firm in structuring its policies, and is applied to the analysis of policies offered by firms in Italy and the UK. While the optimized results are in general agreement with current industry practices, inefficiencies are still identified and potential improvements are suggested. The modeling tools developed for the management of insurance policies are also used to develop a web-based system for individual investors. Investor’s goals and risk profiles are addressed in an integrated fashion. The requirements for real-time modeling by the average investor must be reflected in the model, and this issue will be discussed as well. The practical experience with this model will be discussed.
Professor and Rector, University of Cyprus, Nicosia, Cyprus. Senior Fellow, The Wharton School, University of Pennsylvania, PA. Dr. Zenios is known for his work in computational finance and financial services, high-performance and parallel computations, and operations research. In his career he authored two books, edited sixteen books and journal issues, and (co)authored over 150 scholarly articles in some of the premier journals in the field. He holds two US patents on financial engineering methods, and his work has been reproduced in edited volumes, textbooks and encyclopedias. One of his books on the performance of financial institutions was translated in Chinese in 2005. His book with Yair Censor Parallel Optimization (Oxford University Press) received the 1999 ICS prize of The Institute of Operations Research and the Management Sciences, and his article with A. Soteriou on service quality received a Best Paper Award from the Decision Sciences Institute in 1999. In 2000 he was selected as a Marie Curie Fellow by the European Commission. In 2006 he was the recipient of the EURO Excellence in Practice Award for his work on personal financial planning. Dr Zenios served as consultant for several financial institutions and Government agencies, including the Union Bank of Switzerland, the World Bank, the Federal National Mortgage Association and the Central Bank of Cyprus. He lectured extensively in North and South America, Europe and the Far East. He serves on the editorial board of seven journals and is the editor for the volumes of Asset and Liability Management in Elsevier’s series Handbooks of Finance. He received a BSc. in Mathematics from London University in 1980, a BEng in Electrical Engineering from Council of Engineering Institutions in 1982, MA and PhD in Engineering-Management Systems from Princeton University in 1986, and an Honorary MA from University of Pennsylvania in 1992. Prior to joining the University of Cyprus to serve as the first Dean of the School of Economics and Management he was a tenured faculty member of the Wharton School, University of Pennsylvania. He also held visiting appointments at the Sloan School of the Massachusetts Institute of Technology (MIT) , University of Haifa (Israel), University of Vienna, and the Universities of Bergamo, Milano and Venice as a fellow of the Italian CNR.