Managing Capital Market Risk for Retirement

We offer an overview of solutions available to pension plans to manage capital market risk in order to meet their obligations. We outline the main drivers behind the evolution of asset-liability management (ALM) for pension plans and the emergence of liability-driven investment (LDI) in the last decade. We look at some of the most popular pension de-risking tools and at recent innovations prompted by the Global Financial Crisis. We offer examples based on the rise of cross-asset correlation, the use of hybrid products to mitigate tail risk, and the increasing relevance of counterparty risk mitigation tools such as collateralization. We conclude by outlining some of the main challenges ahead, including developments in pension regulation, centralized clearing of over-the-counter (OTC) instruments, and risk taking incentives in delegated asset management for long term retirement obligations

The complexity of the L(p,q)-labeling problem for bipartite planar graphs of small degree

AbstractGiven a simple graph G, by an L(p,q)-labeling of G we mean a function c that assigns nonnegative integers to its vertices in such a way that if two vertices u, v are adjacent then |c(u)−c(v)|≥p, and if they are at distance 2 then |c(u)−c(v)|≥q. The L(p,q)-labeling problem can be defined as follows: given a graph G and integer t, determine whether there exists an L(p,q)-labeling c of G such that c(V)⊆{0,1,…,t}. In the paper we show that the problem is NP-complete even when restricted to bipartite planar graphs of small maximum degree and for relatively small values of t. More precisely, we prove that: (1)if p<3q then the problem is NP-complete for bipartite planar graphs of maximum degree Δ≤3 and t=p+max{2q,p};(2)if p=3q then the problem is NP-complete for bipartite planar graphs of maximum degree Δ≤4 and t=6q;(3)if p>3q then the problem is NP-complete for bipartite planar graphs of maximum degree Δ≤4 and t=p+5q.In particular, these results imply that the L(2,1)-labeling problem in planar graphs is NP-complete for t=4, and that the L(p,q)-labeling problem in graphs of maximum degree Δ≤4 is NP-complete for all values of p and q, thus answering two well-known open questions

Momentum Strategies in Futures Markets and Trend Following Funds

The research was partially funded by BNPP Hedge Fund Centre at Singapore Management Centre. Copy made available with permission of the authors.</p

Unification of the Construction of Tank Vehicles as an Important Element in Improving the Safety of Transport and Rescue Operations

Aim: The aim of the research was to verify the assumptions regarding the need to unify and standardize the design of tank vehicles in order to make it easier for rescuers from specialized chemical-ecological rescue groups (SRGChem) to make the right decisions at the scene. Ultimately, such unification is expected to allow the safe elimination of the threat by improving the rescue efforts of the groups in question. To carry it out, it is necessary to analyse rescue operations and draw conclusions, which should be made available to the manufacturers of tank vehicles, carriers and SGRchem rescuers. Project and methods: In the first stage of consideration, an analysis of the literature was carried out, followed by a survey of the rescuers who are members of SRGChem in order to find out their opinions on the unification of the construction of tank vehicles. Questions included emergency unloading valves. Interviews were also conducted with experts familiar with the issues of the subject in question, in particular practitioners who perform command functions in the SGRchem on a daily basis. Results: A survey of emergency responders from specialized chemical and environmental rescue groups shows that the vast majority of this group sees a significant problem arising from the varied design of tank vehicles for transporting hazardous substances. An overwhelming number of respondents indicated that unification of the construction of tank vehicles transporting hazardous substances is feasible, but requires a lot of discussions with the manufacturers in terms of seeking new solutions, i.e., insurance relief for tank vehicles that would be certified for unified construction. Conclusions: The transportation of hazardous materials is a complex process that requires specialized knowledge. The organization of transport in accordance with current safety regulations and standards ensures not only the minimization of risks arising from the transport of hazardous materials, but also its full efficiency. It is important to remember that every participant in the transport of dangerous goods has certain responsibilities. The greatest scope is imposed on the carrier and the shipper. At the same time, it is necessary to pay attention to an indispensable element of transport safety – that is, training, which should be carried out for all employees who come into contact with dangerous goods. All these considerations lead to the conclusion that unification of the construction of tank vehicles would have a significant impact on improving the safety of transport and the effectiveness of ongoing rescue operations. Keywords: safety, transport, rescue, training, hazardous substance

Hedge Funds, Managerial Skill, and Macroeconomic Variables

BNP Paribas Hedge Fund Centre at the Singapore Management Universit

Investing in Hedge Funds when Returns are Predictable

This paper evaluates hedge fund performance through portfolio strategies that incorporate predictability in managerial skills, fund risk loadings, and benchmark returns. Incorporating predictability substantially improves performance for the entire universe of hedge funds as well as various subsets based on investment styles. Such outperformance is strongest during market downturns when the marginal utility of consumption is relatively high. Moreover, the major source of investment profitability is predictability in managerial skills. In particular, long-only strategies that incorporate predictable skills outperform their Fung and Hsieh (2004) benchmarks by over 15 percent per year. The economic value of predictability obtains for various rebalancing horizons and is robust to style adjustments as well as adjustments for backfill bias, incubation bias, illiquidity-induced serial correlation, fees, closed funds and alterative benchmark models