Navigating Inflation Risks in the Presence of Financial Liabilities

In this paper, we summarize the impact of economic trends on inflation, and how they impact investors with financial liabilities. Given the complexities and importance of managing inflation risks, we highlight how scenario analysis can assist investors to combine Liability-Driven Investing (LDI) elements with Strategic Asset Allocation (SAA). Using case studies, we illustrate the real-world impact of varying inflation expectations on asset allocation and financial obligations.

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