Old exams asked for when to use each and advantages/disadvantages of each. Struggling to find advantages/disadvantages ALM - think pensions and life insurance Use it when: risk averse large penalty for not meeting liabilities liab are i rate sensitive incentive for holding fixed income (tax, regulatory, legal, etc) Advantage/disadvatages: ?? AO - think endowments and foundations Use it when: higher risk tolerance focus on growth minimal explicit/mandated liabilities Advantage/disadvatages: ??

Advantages/Disadvantages of each pretty simple in my mind: AO Advantage: More simple in practice…don’t have to worry about liabilities Disadvantage: Not appropriate for institutions with significant liabilities to match ALM Advantage: Takes directly into account liabilities…if done properly minimizes risk Disadvantage: In practice, relatively more difficult to use…therefore only appropriate for institutions with significant liabilities