The Russell-Yasuda Kasai Model: An Asset/Liability Model for a Japanese Insurance Company Using Multistage Stochastic Programming

David R. Cariño · David Hobson Myers · Celine Stacy · Mike Sylvanus · Andrew L. Turner · Kouji Watanabe +1 more

362 citations0/0 files storedINFORMS Journal on Applied Analytics

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Risk and Portfolio Optimization Insurance and Financial Risk Management Probability and Risk Models

Abstract

Frank Russell Company and The Yasuda Fire and Marine Insurance Co., Ltd., developed an asset/liability management model using multistage stochastic programming. It determines an optimal investment strategy that incorporates a multiperiod approach and enables the decision makers to define risks in tangible operational terms. It also handles the complex regulations imposed by Japanese insurance laws and practices. The most important goal is to produce a high-income return to pay annual interest on savings-type insurance policies without sacrificing the goal of maximizing the long-term wealth of the firm. During the first two years of use, fiscal 1991 and 1992, the investment strategy devised by the model yielded extra income of 42 basis points (¥8.7 billion or US$79 million).

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1959Portfolio Selection: Efficient Diversification of Investments 1960Portfolio Selection: Efficient Diversification of Investments.

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2006Optimization Methods in Finance 2018Stochastic dual dynamic integer programming 2001Scenario generation and stochastic programming models for asset liability management 1999An Introductory Tutorial on Stochastic Linear Programming Models 1998Formulation of the Russell-Yasuda Kasai Financial Planning Model 1998Dynamic stochastic programmingfor asset-liability management 1998Concepts, Technical Issues, and Uses of the Russell-Yasuda Kasai Financial Planning Model 2003Simulation and optimization approaches to scenario tree generation

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