Balancing Asset Growth and Liability Hedging throughRisk Parity
In this article, the author shows that risk parity strategies offer liability-hedging benefits in addition to exposure to growth assets. Risk parity portfolios are typically levered so that risks can be balanced across asset classes. The effect of doing so effectively levers low-risk assets like bonds and de-levers high-risk assets like stocks. The effective leverage of the bond component increases its duration, giving many risk parity portfolios durations similar to those of defined-benefit plans. This is not liability-directed investment, which targets a particular liability, but it does give liability-hedging properties, which other investment strategies typically do not offer. In addition, this study shows that periods of high and low volatility can affect the ability of a static mix of assets to effectively hedge liabilities.
Due to the limited generation capacity of power stations, many developing countries frequently resort to disconnecting large parts of the power grid from supply, a process termed load shedding. During load shedding, many homes are left without electricity, causing them inconvenience and discomfort. In this paper, we present a number of optimization heuristics that focus on pairwise and groupwise fairness, such that households (i.e. agents) are fairly allocated electricity. We evaluate the heuristics against standard fairness metrics in terms of comfort delivered to homes, as well as the number of times they are disconnected from electricity supply. Thus, we establish new benchmarks for fair load shedding schemes.