Description: The article discusses under which conditions it is appropriate to use the true probability distribution or the risk-neutral probability distribution for interest rate scenario generation. It addresses which should be used for valuation purposes and strategy development.

Description: The author notes that “current market value is highly relevant, but its accuracy is limited. Historical accounting, on the other hand, is highly accurate, but is of little relevance.” The article then goes on to discuss two leading methods for performing fair valuation of liabilities: the actuarial appraisal method and the option pricing method, and how they can be reconciled.

Description: All things considered, caution needs to be applied to the use of so-called “standard” mortality tables. Sharpening up these blunt estimates by using individual assumptions reveals material differences in the structure of longevity, both between plans and within plans.

Description: Discussion of the new scenario generator selected by the NAIC and its behavior at low interest rates.

Description: This article takes a look at how defined benefit (DB) pension plan financials ended the third quarter of 2023 on a solid footing, improving the capacity to take meaningful de-risking actions; as DB plans look to de-risk at reasonable costs, they may find it beneficial to consider a broad range of investment options; and completing a core bond allocation with private credit and income-oriented alternative strategies can help achieve important savings over other frequently pursued de-risking approaches, without materially increasing the funded status volatility or downside risk

Description: This article uses the example of a bullet or general account GIC to determine the fair value of liabilities.

Description: This article discusses techniques for modeling credit risk, including discussion of default assumptions and recovery rates.

Description: Feature article discussing the use of stochastic volatility models in the pricing of investments and options.

Description: GDP growth has slowed as numerous headwinds have emerged. This article summarizes a research paper by Mark Alberts and Max Rudolph that addresses reasons why this is so and how risk managers can address using scenarios.

Description: This article discusses the pricing of life insurance contracts in the risk-neutral world. Specifically it deals with three aspects: 1 the motivation for pricing contracts using a risk-neutral methodology in valuing life insurance contracts 2 development of some ‘intuition’ behind the risk-neutral valuation techniques and 3 some caveats which need to be recognized.