Description: Discussion of how non actuaries are taking on many of the enterprise risk management roles of insurance companies. Discusses changes actuaries need to make to re-assert their roles. Also discusses roles actuaries can play in enterprise risk management outside of the insurance and pension industries

Description: When companies engage in risk management activities, they can be seen as modifying their distributions of future outcomes. Often, this takes the form of trading off a sure cost for a decrease in some potential risk of loss. Companies may carry out these activities with several goals in mind, such as reduction in earnings volatility or preservation of capital. This paper will demonstrate a method for evaluating possible strategies by dividing the effects on costs and risks into three tranches: earnings, impact and estate. The tranches can be associated with different interests of the various stakeholders. This trifurcation analysis can help to explain the risk-reward trade-offs of different risk treatment alternatives and can aid in risk-related decisionmaking.

Description: In his original monograph on portfolio selection, Markowitz [1952] discusses the tradeoff between the mean and variance of a portfolio. Since then, especially recently, much attention has been focused on asymmetric distributions to minimize risks with given return goal for investors who have special skewness preferences. To address this issue, this paper extends Krokhmal et al. [2002]’s approach by adding CVaR-like constraints to the traditional portfolio optimization problem. The CVaR optimization technique has the advantage of reshaping either the left or right tail of a distribution while not significantly affecting the other. Specifically, this approach is used to manage the skewness of asset-liability portfolios of financial institutions. In addition, the CVaR-like constraints approach is compared with traditional Markowitz method and some other alternatives such as, the CVaR approach [directly optimize CVaR], the Boyle-Ding approach as well as the mean-absolute deviation [MAD] approach. Numerical analysis provides empirical support for the superiority of CVaR-like constraints approach in terms of skewness improvement of mean-variance portfolios.

Description: Applications of Stress Testing

Description: Institutional investors seeking to hedge have no shortage of choices, and need the right framework to manage the different risks in portfolios as they arise. This article analyzes performance of different equity hedging strategies over the last 15 years, and lays out a potential hedging framework that takes into account types of risks being hedged, fundamental views, and current market pricing of protection.

Description: The author compares and contrasts methodologies used for value investing and enterprise risk management.