Non-traditional Life Insurance Products with Guarantees
First published:
ISBN: 9781782722038
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Simulations
Simulations
Low Interest Rate Environments and Consequences
Risks Faced by Writers of Investment Guarantees
Variable Annuity in Asia post-2008
How did Variable Annuities Fare in the Crisis?
Traditional Life Insurance Products are Under Pressure
An Overview of Regulatory Requirements
Simulations
Economic Scenario Generators and Variable Annuities
Modelling and Managing Policyholder Behavioural Risks
Modelling and Managing Mortality and Longevity Risks
Valuation of Variable Annuity Guarantees
Understanding and Using Reinsurance Treaties for Guaranteed Products
Hedging of Long-term Fund-linked Exotic Options
Overview of Commonly Used Risk Management Strategies
Taxonomy of Equity, Interest Rate, Hybrid and Customised Derivatives Used for Risk Management
Managing Risks Underlying Variable Annuity Liabilities
Basis Risk
Measuring Hedge Effectiveness
Measuring and Reporting Hedge Efficiency
Eight Important Questions Practitioners Should Ask When Managing Equity-linked Insurance Guarantee Risks
What are simulations? Simulations are a mathematical technique that rely on an ability to mimic the experiment (process) using a probabilistically-generated input to obtain an outcome (result) and the law-of-large-numbers to ensure the convergence of the average value of these outcomes, if the experiment is conducted repeatedly using more inputs sampled from the same probability distribution. Despite the fact that simulations are (and have been) used extensively to assess the risks (including the cost of guarantees) associated with the likes of variable annuities, fixed indexed annuities and other market-linked annuities and insurance products, it was never intended as a tool of choice to price options when first introduced by Boyle (1977). The idea of using simulations to value products such as derivatives only began to catch on and then spread widely when the hardware (for example, fast processing computers) started to become cheaper (see Glasserman, 2004, for more on this topic).
The philosophy underlying the use of simulations to solve any pricing or valuation problem can be reduced more succinctly to answering the following questions.
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- How can one generate random
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