The Price of Asset-liability Control under Tail Conditional Expectation with No Transaction Cost

Asset-liability management is a means of managing the risk that can arise from the changes in the relationship between assets and liabilities. Value-at-risk (VaR) and tail conditional expectation (TCE) have also emerged in recent years as standard tools for measuring and controlling the risk of trading portfolios. In some dynamical settings however, the limits of TCE can be transformed into the limits of VaR and conversely even though TCE is more preferable to VaR since it is coherent and VaR is not. In this paper we obtain the optimal price of an institution’s assets- liabilities under the TCE with no transaction cost.