Calculating correlations – how technology is sharpening ALM approaches
Previously cherished views on asset class correlation were trashed at the height of the credit crunch – but insurers and pension funds are looking to learn from the experience. Clive Davidson reports on how they are integrating this new-found knowledge into their asset and liability management
It is of little surprise that those charged with managing the assets of insurance companies and pension funds are now more focused on risk. The financial crisis of 2007-08, quickly followed by the sovereign debt crisis, has shaken the foundations of traditional equity and bond portfolios. Meanwhile, the crises have exposed correlations between assets and liabilities that were previously either hidden or of such low apparent probability that they were all but ignored. Now the heightened awareness
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