Description: This article talks about replicating portfolios, a basket of financial instruments designed to replicate, as closely as possible, the value and market sensitivity of a target portfolio of liabilities in different economic scenarios.

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: This article discusses the Insurer Solvency Assessment – Towards a Global Framework report prepared by the IAA Insurer Solvency Assessment Working Party WP. The conclusions of the report are consistent with the three pillar approach to the regulation of financial service entities that is reflected in the Basel Accord for the regulation of banks internationally. The pillars are: Pillar I: Minimum financial requirements. Pillar II: Supervisory review process. Pillar III: Measures to foster market discipline.

Description: This article gives an overview of the CFO Forum diversification paper. The key points that the CFO Forum made are: 1. The lack of sufficient diversifying strategies for risk management needs to be addressed. Therefore they provided a policy framework that promotes sound risk measurement and management practices in a way that can be implemented and supervised with confidence. 2. The lack of sufficient regulatory over-site needs to be addressed, so they presented a set of core principles to form the basis of European insurance regulation. These core principle incorporate diversification in a consistent manner.

Description: The CAS has sponsored research which explores potential exposure bases for rating cyber liability. This short article gives some highlights from that research.

Description: The article provides a high-level, non-technical, introduction to artificial neural networks (ANNs) and deep learning with an application to risk management. The method relies on typical ANN components such as nodes, activation functions, and optimization through gradient descent.

Description: An introductory article describing how Bayesian statistics has evolved over the past 20 years and why it offers the actuarial discipline powerful tools to better understand and manage risk. Compared with traditional (frequentist) and black-box (machine learning) approaches, Bayesian analysis provides explainable models focused on distributions of estimates instad of simply point estimates.

Description: This article provides an excerpt of the results of a survey on policyholder behavior in the tail with respect to variable annuity guaranteed benefits. GMIB is specifically addressed.

Description: Economic risk analysis has two dimensions: time and frequency. Asset return varies by time because of economic cycles and economic structural changes. Risk is higher during economic recessions and smaller during economic expansions. In addition, different economic structures may exist at different time scales. Risk measures calculated based on daily, weekly, monthly and yearly historical data can be very different. The appropriate frequency depends on the time horizon of the analysis. Therefore, it is important to measure economic risk at both the time level and the frequency level. However, time series analysis and statistical analysis that have been widely adopted in economic risk analysis focus on only one of the two dimensions. In this paper, wavelet models are used to enhance both time‐invariant analysis and time‐variant analysis. Wavelet models can systematically analyze risk by time and frequency and provide richer information than time series models. Using wavelet models, risk measurement can easily be adjusted based on time horizon in a consistent way. Equity VaR estimation is selected to demonstrate the application of wavelet analysis in risk management.

Description: One of the most fundamental concepts in actuarial practice is the time value of money. For any work in which future cash flows are allowed for, such as reserving or pricing, it is natural to discount to present values so that an appropriate amount of money can be set aside today, allowing for future investment returns. This article discusses yield curve extrapolation methods along with the benefits and drawbacks of these methods.