Institutional mgmt reading 15

A

AndrewWheeler87

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Liability relative approach - Can someone walk me through how tables 3, 4, and 5 are linked and how they are used to derive the end asset weights in the mimicking portfolio? For instance table 3 begins with the volatility and correlation of the various components of risk, no problem. From there it gets a little fuzzy. I get table four is derived from regressing the liabilities and asset values on the risk factors (I think). But how to tables 3 and 4 work into generating table 5? What is table 5 even??? Lastly, from there how do they derive the asset weights for the rf mimicking portfolio?
Thanks a ton?
 
On second thought, I think was covered in L2 under multi factor models - they aren’t showing the long hand of it but, if you know common factor sensitivities and factor correlations you can derive the covariance between the various assets and liabilities. Maybe they aren’t wanting you to go as deep into the calcs as I was stressing over.
 
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