Matching and portfolio selection: Part 2

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This paper is concerned with the selection of investment portfolios to meet specified criteria which involve the liabilities of a long term investing institution such as a pension fund or a life office. In Part 1 I showed a certain relationship between, on the one hand, portfolios selected according to a criterion of pure matching to the liabilities and, on the other hand, portfolios selected according to a more general criterion of ‘efficiency’. This connection points to a particular actuarial approach to the selection of portfolios, which is now further examined in Part 2.