Description: This article focuses on one fundamental modeling assumption — the choice of a benchmark rate or risk-free rate. The author looks at this bond market assumption as a case study of how one needs to monitor fundamental market changes for their impact on assumptions.

Description: There are two main techniques for evaluating the financial impact of interest rate movements on insurance companies: duration measures and computer simulations. In many ways these approaches provide complementary viewpoints.

Description: “It’s interesting to note that, given the past year’s reversal of fortunes in the stock markets, all the media rap about heated inquiries around back-dating options has stopped.”

Description: “Many commentators have suggested that firms need to do stress tests to examine their vulnerability to adverse situations that are not within the data set used to parameterize their risk models. We suggest the adop¬tion of a terminology to describe stress tests and also a meth¬odology that can be adopted by any risk model user to test and communicate a test of the stability of model results.”

Description: What is going on with the exchange rate, anyway? In 2002, $1 U.S. bought $C 1.60, and now in May 2005 you only get $C 1.25—that’s 20 percent less! Where’s it going next? One way to answer that question is with a time series model.

Description: In this article about interest rate models, the author develops an empirical description of the term “interest rate regime,” and looks at the relationship between changes in yield curves and moving to a new interest rate regime.