1、外文翻译原文STRATEGICFOREIGNRESERVESRISKMANAGEMENTANALYTICALFRAMEWORKMATERIALSOURCEANNOPERRES200715279113AURHORSTIJICLAESSENSJEROMEKREUSERABSTRACTWEPRESENTANANALYTICALFRAMEWORKFORACTIVEFOREIGNEXCHANGERESERVESMANAGEMENTTHATINTEGRATESRISKRETURNOBJECTIVESWITHMACROECONOMIC,MACROPRUDENTIALANDSOVEREIGNDEBTMANAG
2、EMENTCONCERNSOURFRAMEWORKALLOWSFORVERYGENERALOBJECTIVEFUNCTIONS,DOESNOTRESTRICTTHECLASSOFELIGIBLESTOCHASTICPROCESSESORLIMITTHEINVESTMENTUNIVERSE,ANDCANINCORPORATEMANYTYPESOFMACROECONOMICCONCERNSITINCORPORATESSEVERALKINDSOFRISKCONSTRAINTSINORDERTOOBTAINBENCHMARKSSATISFYINGPOSSIBLECENTRALBANKREQUIREME
3、NTSOFSAFETY,LIQUIDITY,RETURNS,ANDSTABILITYFEEDBACKBETWEENOUTCOMESANDDECISIONSISEASYUSINGTOOLSTHATRESHAPEDISTRIBUTIONSANDFUNCTIONSOFTHEOUTCOMESANDTHEMODELCANBERUNONAPCBASEDPLATFORMWEAPPLYTHEFRAMEWORKTOSEVERALCOMMONRESERVESMANAGEMENTPROBLEMSFOCUSINGESPECIALLYONTHEFORMULATIONOFMODELEQUATIONS,GENERATION
4、OFTREESANDESTIMATIONOFDENSITYFUNCTIONSOFOUTCOMESWECOMPAREOURAPPROACHTOTHOSEUSEDBYMANYCENTRALBANKSANDDISCUSSADVANTAGESTOOURAPPROACHKEYWORDSRESERVESMANAGEMENTALMASSETLIABILITYDYNAMICSTOCHASTICOPTIMIZATIONCENTRALBANKFOREIGNEXCHANGERESERVESRISKMANAGEMENTCONCERNSBALANCINGMANYOBJECTIVESANDISSUES,FROMBROAD
5、MACROECONOMYPOLICYOBJECTIVES,SUCHASMONETARYPOLICYANDFOREIGNEXCHANGEMANAGEMENT,TOMICROASPECTS,SUCHASTHEDEFINITIONOFPORTFOLIOBENCHMARKSANDTHEEVALUATIONOFINVESTMENTMANAGERSFURTHERMORE,CONSTRAINTSARISINGFROMLEGAL,HUMANRESOURCES,ASSETMARKETS,INSTITUTIONALANDOTHERASPECTSAFFECTTHEACTUALACHIEVABILITYANDIMPL
6、EMENTATIONOFRESERVESMANAGEMENTOBJECTIVESWHILETHEMACROECONOMICASPECTSOFRESERVESMANAGEMENTHAVEBEENMUCHANALYZED,THEYCONTINUETODRAWATTENTION,ESPECIALLYTHERELATIONSHIPBETWEENFINANCIALCRISESANDRESERVESANDDEBTMANAGEMENTMANYCRISESINTHELASTDECADEHAVEUNDERSCOREDRELATIONSHIPSBETWEENFOREIGNEXCHANGERESERVESANDPU
7、BLICDEBTMANAGEMENTANDHIGHLIGHTEDHOWPRIVATEDEBTMANAGEMENTCANEXACERBATEECONOMICORFINANCIALSHOCKSTHEMICROASPECTSOFIMPROVINGRESERVESMANAGEMENTHAVEALSORECEIVEDMUCHMOREATTENTIONWITHTHEWIDERINVESTMENTUNIVERSEANDTHEBROADERRANGEOFFINANCIALTOOLSTHATHAVEBECOMEAVAILABLETHESEDEVELOPMENTSHAVELEDTOMOREACTIVERESERV
8、EMANAGEMENTSTRATEGIESANDMETHODSAPPLIEDBYPRIVATEASSETMANAGERSTOFINDTHEIRWAYINTOFOREIGNEXCHANGERESERVESMANAGEMENTWHILETHESEMACROANDMICROISSUESHAVEBEENCONSIDEREDFORSOMETIMEANDAREANALYZEDINMUCHDETAILINVARIOUSSTRANDSOFLITERATURE,OFTENTHESEASPECTSARENOTBEINGCONSIDEREDJOINTLY,ATLEASTNOTWITHINONE,COMMONANAL
9、YTICALANDEMPIRICALFRAMEWORKTHEANALYSISOFTACTICALINVESTMENTMANAGEMENT,FOREXAMPLE,OFTENTAKESTHEACHIEVEMENTOFCERTAINMACROOBJECTIVESASGIVENANDFOCUSESMAINLYONASSESSINGMORENARROWLYDEFINEDRISKRETURNTRADEOFFANDVICEVERSA,THEMACROLITERATUREHASOFTENFOCUSEDONTHELINKSBETWEENFOREIGNEXCHANGERESERVESMANAGEMENTANDEX
10、CHANGERATEDETERMINATION,BUTHASGIVENLITTLECONSIDERATIONTOTHEINVESTMENTCHOICESMADE,SAYINTERMSOFCURRENCYANDMATURITYRECENTEXPERIENCESSUGGESTTHATTHESEASSUMPTIONSOFSEPARATIONCANNOTBETAKENFORGRANTEDSINCETHEREAREMANYRELATIONSHIPSANDFEEDBACKSBETWEENTHEVARIOUSMACROANDMICROECONOMICASPECTSANDBETWEENFOREIGNEXCHA
11、NGERESERVESANDLIABILITYMANAGEMENTTHEFINANCIALCRISESLITERATURE,FOREXAMPLE,HASDRAWNATTENTIONTOTHENEEDTOCONSIDERTHEOVERALLBALANCESHEETOFTHEGOVERNMENT,ANDINDEEDOFTHECOUNTRYASAWHOLE,WHENCONDUCTINGFOREIGNEXCHANGERESERVESANDDEBTMANAGEMENTLITERATUREHASALSOHIGHLIGHTEDHOWPRIVATEDEBTMANAGEMENTANDFINANCIALSECTO
12、RVULNERABILITIESCANAFFECTPUBLICDEBTANDRESERVEMANAGEMENTTHESTARTINGPOINTTOINTEGRATETHEVARIOUS,SOMETIMESDISJOINTAPPROACHESHASTOBEANANALYSISOFWHATAGENERALFRAMEWORKSHOULDLOOKLIKEONECANTHENASSESSWHATISFEASIBLECOMPUTATIONALLYANDORGANIZATIONALLYWEWILLSHOWINTHISPAPERTHATRECENTTECHNOLOGICALANDANALYTICALADVAN
13、CESALLOWFORVERYGENERALAPPROACHESTHATATTHESAMETIMECANLEADTOOUTPUTSTHATAREEASILYUNDERSTANDABLEANDTOOLSTHATAREEASILYIMPLEMENTABLEASWELLASADJUSTABLEOURAPPROACHISBASEDONAGENERAL,DYNAMICSTOCHASTICOPTIMIZATIONMODELWITHATREEBASEDUNCERTAINTYSTRUCTURETHENUMERICALAPPROACHALLOWSUSTOMOVEBEYONDTHECLASSICALMETHODS
14、OFRISKANDRETURN,EFFICIENTFRONTIERS,ANDUTILITYFUNCTIONSBYCONSIDERINGMUCHMOREGENERALOBJECTIVEFUNCTIONS,BEHAVIORALRELATIONSHIPS,EQUALITIES,ANDINEQUALITIESTHEAPPROACHALSOINNOVATESBYALLOWINGTHEUSERTOVIEWTHEFULLDENSITYFUNCTIONSOFANYOUTCOMESTHATDEPENDUPONTHEOPTIMALDECISIONSTAKENTHEUSERCANTHENRESHAPETHESEDE
15、NSITYFUNCTIONSASMUCHASPOSSIBLETOANYDESIREDPROFILESANDOBTAINTHERESULTANTDECISIONSTOBETAKENTODAYTOACHIEVETHESEPROFILESASWEWILLSHOW,THISAPPROACHALLOWSSENIORMANAGEMENTTODEFINERELATIVELYBROADOBJECTIVESANDCONSTRAINTS,ANDHAVETHOSETRANSLATEDINTOANANALYTICALLYRIGOROUSAPPROACH,WITHOUTGIVINGUPBASICINTUITIONAND
16、UNDERSTANDINGTHEOUTLINEOFTHEPAPERISASFOLLOWSWEFIRSTREVIEWTHETYPICALAPPROACHESUSEDFORFOREIGNEXCHANGERESERVESRISKMANAGEMENTWETHENPRESENTOURGENERALAPPROACHTOASSETLIABILITYMANAGEMENTALM,INCLUDINGRESERVESMANAGEMENT,USINGADYNAMICSTOCHASTICOPTIMIZATIONMODELTHISISFOLLOWEDBYSEVERALAPPLICATIONSOFOURAPPROACHTO
17、THEPROBLEMOFFOREIGNEXCHANGERESERVESMANAGEMENTBYACENTRALBANK,ALONGWITHSOMESPECIFICEXAMPLESTHROUGHOUTTHEPAPERWEUSETHEWORDALMINTHEMOSTGENERALSENSE,THATIS,TOREFERTOTHEANALYSISANDMANAGEMENTOFRISKSRELATEDTOANYCOMBINATIONOFASSETS,LIABILITIES,OFFBALANCESHEETITEMS,ANDANYCASHFLOWSTHATCOULDAFFECTTHEMARKETVALUE
18、OFTHEPORTFOLIOORTHEOBJECTIVEFUNCTION,INCLUDINGCONTINGENTLIABILITIESANDCATASTROPHICEVENTSTYPICALAPPROACHESTOFOREIGNEXCHANGERESERVESRISKMANAGEMENTAPPROACHESTORESERVESMANAGEMENTVARYALONGAWIDESPECTRUMATOPPOSITEENDSOFTHESPECTRUMARETHETRADITIONAL,PUREMACROECONOMICONLYORIENTEDAPPROACHESANDTHEPUREMICROBASED
19、,RISKRETURNONLYORIENTEDAPPROACHESWEDISCUSSTHEMACROECONOMICAPPROACHESFIRST,THETRADITIONALRESERVESMANAGEMENTOBJECTIVESHAVEMOSTLYBEENFORMULATEDWITHRESPECTTOMONETARYPOLICYANDEXCHANGERATEMANAGEMENTTHESEMACROECONOMICCONCERNSAREMOSTRELEVANTINTHECONTEXTOFFIXEDORMANAGEDEXCHANGERATEREGIMESWITHSOMEDEGREEOFCAPI
20、TALMOBILITYINTHATCASE,FOREIGNEXCHANGERESERVESNEEDSTOBUFFERAGAINSTCAPITALOUTFLOWSINEXCESSOFTHETRADEBALANCEANDRESERVESWILLINCREASEASCAPITALFLOWSEXCEEDANYTRADEDEFICITANDVICEVERSARESERVESMANAGEMENTISTHENSECONDARYTOTHEMACROECONOMICOBJECTIVESANDMAINLYINVOLVESLIQUIDITYMANAGEMENT,WHICHISASSURINGTHEAVAILABIL
21、ITYOFSUFFICIENTFREERESERVESATEACHMOMENTINTIMETOINTERVENEINTHEFOREIGNEXCHANGEMARKETMOREGENERALLY,UNDERFIXEDASWELLASFLOATINGEXCHANGERATEREGIMES,THEMACROECONOMICLITERATUREVIEWSHOLDINGRESERVESASAWAYTOSMOOTHSHORTRUNSHOCKSINEXTERNALTRANSACTIONS,SUCHASVARIATIONSINIMPORTSDUETOTERMSOFTRADESHOCKSORVARIATIONSI
22、NTHECAPITALACCOUNTDUETOFINANCIALSHOCKSRULESHAVEBEENDEVELOPEDFORTHESECIRCUMSTANCES,ALONGTHELINESOFOPTIMALCASHINVENTORYMANAGEMENTFORCORPORATIONSTHESIMPLESTPRACTICALAPPLICATIONOFTHISAPPROACHHASTAKENTHEFORMOFTARGETINGAMINIMUMRATIOOFFOREIGNEXCHANGERESERVESTOIMPORTS,EG,HOLDINGFOREIGNEXCHANGERESERVESATLEAS
23、TEQUIVALENTTO12MONTHSOFIMPORTSTHESEANDOTHER,MORESOPHISTICATEDRULESFORACOUNTRYSDEMANDFORINTERNATIONALRESERVESHAVEMOSTLYCONSIDEREDONLYREALVARIABLES,SUCHASIMPORTS,EXPORTS,ANDTHESEVERITYOFPOSSIBLETERMSOFTRADESHOCKS,ASWELLASSOMEMONETARYPOLICYCONSIDERATIONSMOSTOFTHISRESEARCH,HOWEVER,DOESNOTCONSIDERFINANCI
24、ALORBALANCESHEETVARIABLESGOVERNMENTSTYPICALLYFINDITRELATIVELYINEXPENSIVETOBORROWSHORTTERM,SINCESPREADSUSUALLYCONTAINATERMPREMIUM,ESPECIALLYSOFOREMERGINGMARKETSGOVERNMENTSBUTAHIGHPROPORTIONOFSHORTTERMDEBTTENDSTOINCREASETHEPROBABILITYOFSELFFULFILLINGCRISES,ASINVESTORSMIGHTSUDDENLYDECIDENOTTOROLLOVERMA
25、TURINGDEBTORINCREASEREQUIREDYIELDSONNEWDEBTWITHFOREIGNEXCHANGERESERVESLOWRELATIVETODEBTPAYMENTSFALLINGDUE,THERISKOFACURRENCYORFINANCIALCRISISCANINCREASESHARPLYTHESTRUCTUREOFPUBLICDEBT,ESPECIALLYITSMATURITYANDCURRENCYCOMPOSITION,INDEEDHASHADKEYIMPLICATIONSINMANYRECENTCRISESORNEARCRISESINTHOSECASES,AS
26、IGNIFICANTSHAREOFPUBLICDEBTWASISSUEDINFOREIGNCURRENCYAND/ORLINKEDTOFOREIGNCURRENCYANDCONTRIBUTEDTORAPIDINCREASESINDEBTRATIOSWHENEXCHANGERATESDEPRECIATED,INVITINGFURTHERPRESSUREONRESERVESANDTHEEXCHANGERATEASITGENERATEDDOUBTSABOUTTHESUSTAINABILITYOFPUBLICORPRIVATESECTORFINANCESTHELITERATURETHATSTUDIES
27、THESERELATIONSHIPSBETWEENGOVERNMENTDEBTLEVELS,MATURITYSTRUCTUREANDRESERVESMANAGEMENTANDFINANCIALCRISESISRAPIDLYGROWINGTHELITERATUREHASLEDTOTHEVARIOUSRULESONWHATAREACCEPTABLELEVELSOFDEBTPAYMENTSFALLINGDUERELATIVETOTHELEVELOFFOREIGNEXCHANGERESERVESONERULEOFTHUMBHASBEENTHATACOUNTRYSGOVERNMENTEXTERNALDE
28、BTREPAYMENTSFALLINGDUEINTHENEXT12MONTHSSHOULDNOTEXCEEDITSFOREIGNEXCHANGERESERVESINSOMECRISISCOUNTRIES,PRIVATEASSETANDLIABILITYMANAGEMENTHASALSOCONTRIBUTEDTOPRESSURESONRESERVESBYNOTPROVIDINGFORSUFFICIENTBUFFERSAGAINSTSHOCKSCONSEQUENTLY,SOMERULESHAVEINCLUDEDPRIVATEASWELLASPUBLICDEBTPAYMENTSFALLINGDUER
29、ELATIVETOFOREIGNEXCHANGERESERVESINGENERAL,THESTRUCTUREOFBALANCESHEETS,WHETHEROFTHESOVEREIGN,THEBANKINGSYSTEMORTHECORPORATESECTORHAVERECEIVEDMOREATTENTIONAMONGRESERVEMANAGERSLATELYASRESERVESKEYROLEASABUFFERINRELATIONTOBOTHPUBLICANDPRIVATEDEBTHASBECOMECLEARERLESSMACROECONOMICORBALANCESHEETORIENTEDAPPR
30、OACHESANDMOREMICROECONOMICORIENTEDAPPROACHESTORESERVESMANAGEMENTAREFEASIBLEWHENMONETARYPOLICY,EXCHANGERATEANDDEBTMANAGEMENTISSUESAREOFLESSCONCERN,ANDWHENVULNERABILITIESINTHEFINANCIALANDCORPORATESECTORSARESMALLTHISMAYBETHECASEWHENTHEGOVERNMENTPURSUESAFLEXIBLEEXCHANGERATEPOLICY,WHENITHASACREDIBLEFISCA
31、LPOLICYANDINSTITUTIONALFRAMEWORK,ANDWHENDOMESTICFINANCIALMARKETSAREWELLDEVELOPEDAMOREACTIVEAPPROACHTORESERVESMANAGEMENTMAYTHENPUTGREATEREMPHASISONPROFITOBJECTIVES,ALTHOUGHSTILLWITHINCERTAINBOUNDSTHEIMPLEMENTATIONOFTHISOBJECTIVEMAYINVOLVETHEDIVISIONOFTHERESERVESPORTFOLIOINTOACTIVEANDPASSIVEPARTSTHEPA
32、SSIVEPORTFOLIOWOULDBEUSEDTODEALWITHMACROECONOMICOBJECTIVES,ANDBEMAINLYMANAGEDWITHLIQUIDITYOBJECTIVESINMINDTHEACTIVEPORTFOLIOCOULDBEUSEDFORPROFITPURPOSES,POSSIBLYTAKINGINTOACCOUNTLIABILITYMANAGEMENTOBJECTIVESITSMANAGEMENTWOULDCONSIDERTHEBREADTHOFTACTICALRISKMANAGEMENTTOOLSAVAILABLE,INCLUDINGMANYTYPES
33、OFINVESTMENTSANDBORROWINGS,ANDFORWARDS,SWAPS,PLAINVANILLAANDEXOTICOPTIONS,ETC,ANDUSECONCEPTSSUCHASVALUEATRISKTHEDIVISIONINTOTWOPORTFOLIOSMAY,EXPLICITLYORIMPLICITLY,INVOLVETHESEPARATIONOFOBJECTIVES,ASINTHECASEOFSEPARATEMANAGEMENTWHEREITMAYBEASSUMEDTHATTHEREWILLBELITTLEORNOSPILLOVERBETWEENTHETWOPARTS,
34、ATLEASTOVERTHEHORIZONSSETFORTHEMANAGERSITWILLTYPICALLYALSOINVOLVEDIFFERENTINSTITUTIONALARRANGEMENTSFORTHEMANAGEMENTOFTHETWOPORTFOLIOSASWELLASDIFFERENTINVESTMENTTOOLSORINSTRUMENTSTOBEUSEDINTERMSOFALM,THEMANAGEMENTOFTHEPASSIVEPORTFOLIOCOULDBESIMILARTOTHEGENERAL,MOREMACROORIENTEDLIQUIDITYMANAGEMENTRAIS
35、EDABOVETHEALMOFTHEACTIVEPORTFOLIOWOULDAPPEARTOCOMEVERYCLOSETOTHEALMISSUESFACINGACOMMERCIALBANKORACORPORATIONWHILECORRECTINMANYWAYS,THERESTILLREMAINCONSIDERABLEDIFFERENCES,HOWEVER,SUCHASTHEDIFFICULTYBYWHICHMEASURETOJUDGETHEPERFORMANCEOFTHEPORTFOLIOEG,INWHICHCURRENCYSHOULDTHEPROFITSANDRISKSOFACENTRALB
36、ANKBEMEASURED,THELOCALCURRENCYORONEOFTHEINTERVENTIONCURRENCIES,EG,USDOLLAR,EUROORYENIMPORTANTLY,THEIMPLICITASSUMPTIONOFSEPARATIONWOULDNEEDTOBEREVIEWEDREGULARLYINPRACTICE,THESEMACROANDMICROBASEDOBJECTIVESANDACCOMPANYINGTOOLSFORRESERVESMANAGEMENTWILLOFTENBEMIXEDORTAKEAHIERARCHICALFORMTYPICALLY,APPROAC
37、HESUSEDFORCENTRALBANKRESERVESMANAGEMENTINVOLVECOMBINATIONSOFMANYOBJECTIVES,WITHFOURMAINCONCERNSOFTENMENTIONED,USUALLYINTHISORDERSECURITY,LIQUIDITY,PROFIT,ANDSTABILITYCORRESPONDINGLY,ANALYTICALALMMODELSMAYTRYTODEFINEONEORMOREOFTHESEOBJECTIVESFOREXAMPLE,THECENTRALBANKMAYMAKEITSALMOBJECTIVETRYINGTOACHI
38、EVETHOSEASSETANDCURRENCYALLOCATIONSFORWHICHTHEPROBABILITYOFNEGATIVEUNREALIZEDLOSSESISVERYSMALLORTHEOBJECTIVEMAYBETOHAVESUFFICIENTLIQUIDITYAVAILABLEFORINTERVENTIONIN99OFCASESORTHEOBJECTIVEMAYBETHATTHERATESOFRETURNNEEDTOBEBETWEEN3AND4,WHILEATTHESAMETIMETHERATIOOFSHORTTERMDEBTTORESERVESSHOULDNOTEXCEED1
39、05FOR99OFTHETIMEORTHEOBJECTIVESMIGHTBESTATEDASSOMECOMBINATIONOFTHESEOROTHERSINTHENEXTTWOSECTIONSWEWILLDESCRIBEOURANALYTICALFRAMEWORKANDITSAPPLICATIONTOSPECIFICRESERVESMANAGEMENTPROBLEMSTHATWILLPROVIDESTRATEGICALLOCATIONSOFASSETS,CURRENCIES,ANDLIABILITIESTOMEETTHESEKINDSOFMIXEDMACROANDMICROBASEDOBJEC
40、TIVESTHEANALYTICALFRAMEWORKISADYNAMICSTOCHASTICOPTIMIZATIONMODEL1WHEREASINTHEPASTTHESEKINDSOFMODELSMAYHAVETAKENALONGTIMETOBUILDANDDEPLOY,WITHTHECONFLUENCEOFSEVERALNEWDEVELOPMENTSINMATHEMATICS,COMPUTERS,ALGORITHMS,MODELINGLANGUAGES,ANDTOOLSFORINSIGHTANDINTUITION,THISISNOLONGERTHECASETHISPAPERISBASEDU
41、PONARESEARCHPROJECTTODEVELOPCONCEPTUALFRAMEWORKFORSOVEREIGNALMUNDERTAKENATTHEWORLDBANKDURINGTHE90SANDSUMMARIZEDINCLAESSENSETAL1998ANAPPLICATIONOFTHISFRAMEWORKTOTHEREPUBLICOFCOLOMBIAISPROVIDEDINCLAESSENSETAL2000THEANALYTICALFRAMEWORKALSOHASACORRESPONDINGCOMPUTATIONALFRAMEWORKTHATMAKESITPOSSIBLETOFORM
42、ULATE,SOLVE,ANDIMPLEMENTTHESEMODELSVERYRAPIDLY,WHICHISDISCUSSEDINKREUSER2002THISISVERYIMPORTANTBECAUSE,EVENTHOUGHWEWILLSPECIFYPRECISELYTHEEQUATIONSFORAPROTOTYPEMODEL,EACHCENTRALBANKORGOVERNMENTWILLHAVEITSOWNUNIQUEMODELINGREQUIREMENTSTHEIDEAISTHATITISEASYTOMODIFYTHESEMODELSTOMEETTHOSESPECIFICREQUIREM
43、ENTSWEWILLDISCUSSCREATINGTHEFRAMEWORKFORASPECIFICPROBLEMFORACENTRALBANKWETURNTOTHEIMF2003PAPERTODISCUSSINDIVIDUALCASESOFCENTRALBANKSCURRENTPRACTICESFORMANAGINGRESERVESANDTOILLUSTRATETHETYPESOFCOUNTRIESTHATWOULDBENEFITFROMTHESPECIFICAPPLICATIONSINTHISPAPERWEHAVEPRESENTEDAFRAMEWORKFORFOREIGNEXCHANGERE
44、SERVESMANAGEMENTTHATCOMBINESTACTICALASSETALLOCATIONCONSIDERATIONSWITHBROADMACROECONOMIC,MACROPRUDENTIALRISK,ANDSOVEREIGNDEBTMANAGEMENTCONSIDERATIONSOURFOREIGNEXCHANGERESERVESMANAGEMENTFRAMEWORKALLOWSFORVERYGENERALOBJECTIVEDEFINITIONSANDDOESNOTRESTRICTTHECLASSOFELIGIBLESTOCHASTICPROCESSESORLIMITTHEIN
45、VESTMENTUNIVERSEITALSOALLOWSFOREASYFEEDBACKBETWEENOUTCOMESANDDECISIONVARIABLESBYINCLUDINGVARIOUSTOOLSTHATCANRESHAPEDENSITIESTHEMODELCANALSOBEOPERATEDUSINGAPCBASEDPLATFORMWESHOWTHEPOSSIBLEAPPLICATIONSOFOURAPPROACHTOSEVERALCOMMONRESERVESMANAGEMENTPROBLEMS,HOWITCOULDBEUSEDBYCENTRALBANKS,ANDTHEADVANTAGE
46、SOVERALTERNATIVEAPPROACHESWESEEOURAPPROACHASANIMPORTANTCOMPLEMENTTOTHEVARIOUSALMTOOLSCURRENTLYBEINGUSEDBYCENTRALBANKSANDMINISTRIESOFFINANCEANDCOMMERCIALBANKSAROUNDTHEWORLDOURAPPROACHISMOREDEMANDINGTHANOTHERAPPROACHESINTERMSOFANALYTICALMODELINGREGARDINGOBJECTIVES,CONSTRAINTSANDASSUMPTIONSWETHINKTHISI
47、SWORTHWHILEFORSEVERALREASONSSTRATEGICALLOCATIONANDTHEFORMATIONOFBENCHMARKSCANBEONEOFTHEMOSTIMPORTANTDETERMINANTSOFPORTFOLIORETURNSANDOVERALLRESERVEMANAGEMENTOBJECTIVESITISTHEREFOREIMPORTANTTHATTHESTRATEGICANALYSISBEDONEINCORPORATINGALLTHERISKSANDOTHERFACTORSINANINTEGRATEDFASHIONSECOND,ADYNAMICFRAMEW
48、ORKTHATALLOWSFORREBALANCINGISVERYIMPORTANTTOBENCHMARKCREATIONITALLOWSFORINCORPORATINGLONGERTERMEFFECTSSUCHASMEANREVERSIONOFEXCHANGERATES,CHANGINGCORRELATIONS,EXTREMEEVENTSANDCONTINGENTLIABILITIESANDTHEIMPACTSOFINSTRUMENTSSUCHASLONGERDURATIONASSETSANDDERIVATIVESNEXTOUROBJECTIVESANDTHERISKCONSTRAINTST
49、HATWEINTRODUCEDALLOWUSTOCAPTUREMULTIPLECENTRALBANKCONSIDERATIONSFORSAFETY,LIQUIDITY,STABILITY,ANDRETURNSANDITALLOWSUSTOCONSIDERMODELSINCORPORATINGNOTONLYASSETSANDLIABILITIES,BUTALLKINDSOFRISKINDICATORSANDOBJECTIVESTHATAREIMPORTANTTOCENTRALBANKSLASTLY,THEEXISTINGAPPROACHESUSEDBYCENTRALBANKSDONOTPROVIDEFORTHERICHNESSOFTHEKINDSOFISSUESTHATCANBEADDRESSEDINSTRESSTESTSASOURFRAMEWORKCANOURAPPROACHHASALSOIMPORTANTADVANTAGESBECAUSEITREQUIRESAVERYEXPLICITPROCESSOFMODELDEVELOPMENTTHATWILLHELPCLARIFYTHESTRATEGICASPECTSINVOLVEDINRISKMANAGEMENTOFTEN,THESESTRATEGICASPECTS,INCLUDINGLINKAGESBETWEENMACR
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