Description: Presented at October 1996 Annual Meeting. The SOA has co-sponsored a research project on the use of derivatives by the insurance industry, using annual statement data reported by insurance companies. This session presents the results of the study, and implications with respect to sufficiency of RBC are discussed.

Description: In this article the author asserts that issuers of credit default swaps should hold reserves for the liabilities associated with the derivative contracts. This would significantly reduce most of the major problems associated with the trading of these instruments.

Description: This note develops the optimality of the put option as a hedging strategy. For an investor who owns a stock, he can buy a put option to hedge against the downside risk of the stock price. In this short note, we ask two questions with the hedge strategy of the put option. First, whether the investor is better off with the hedging strategy? Second, if the investor is better off with the hedging strategy, whether it is the optimal hedging plan? Our result shows that in a risk averse world an investor will maximize his utility with buying the put option as a hedge strategy.

Description: This paper examines the problem of hedging foreign exchange risk across multiple countries using currency options. The profit target requirement is formulated as a stochastic constraint in the context of a binomial lattice. Models are presented for European options. In a numerical example, five currency options are selected, allowing for long or short positions, depending on the target value.

Description: This article explores the effectiveness of hedging delta and rho of equity options. This provides insight into the frequency and severity of losses due to not hedging volatility risk or other higher order risks. 10yr-equity put option strategies were chosen to represent the risk of hedging guaranteed benefits attached to variable annuities, while 1-yr put and call strategies were modeled to investigate the risk of hedging equity index interest credited to fixed indexed annuities. In both cases, the value of the option was compared to the value of delta/rho hedges in the tail of both actual historical and simulated scenarios for equity returns and volatilities. The historical path of interest rates and equities was generally used to highlight the hedge impact for different implied volatility assumptions in each example.

Description: Proposes alternatives for estimating the long term interest returns in Indexed Universal Life products. Defends expected return of 20%-45% on hedge budgets.

Description: Presented at June 1996 Spring Meeting. Provides overview of modern pricing of assets such as derivatives. It includes theory and practical applications, particularly how they relate to insurance companies.

Description: Research projects in pension - Pension Risk Management: Derivatives, Fiduciary Duty and Process.

Description: Article discusses possible effects of negative interest rates on product development, risk management, investment management and in-force management.

Description: This session at the SOA 1990 Hartford Spring Meeting presents an overview of foreign currency swaps, participants and growth in the market. Case studies are discussed.