Strategic Investment and Risk Management For Sovereign Wealth Funds
Central Bank Reserves and Sovereign wealth Management, Edited by Arjan Bastiaan Berkelaar, Arjan B. Bekelaar, Joachim Coche, and Ken Nyholm, Palgrave Macmillian, Dec., 2009.
46 Pages Posted: 30 Nov 2017
Date Written: December 5, 2008
We present an analytical framework for active strategic risk management for sovereign wealth funds (SWFs). This paper extends our previous work on foreign exchange reserves management that integrates risk-return objectives with macroeconomic, macro-prudential and sovereign debt management concerns. In this paper we allow for the integration of very general objectives and multiple kinds of risk that are specific to SWFs and that need to be managed simultaneously. We apply this framework to stabilization funds, national pension funds, endowment funds, and development funds focusing especially on the formulation of model equations, the estimation of density functions of outcomes, and the utilization of results. We compare our approach to others and discuss the advantages.
Keywords: Sovereign Wealth Funds, ALM, asset/liability, dynamic stochastic optimization, asset/liability allocation
JEL Classification: C61, G11
Suggested Citation: Suggested Citation