Description: This paper represents a brief progress report on research, being sponsored by the Casualty Actuarial Society CAS and the Society of Actuaries SOA, in the area of modeling of economic series. In particular, research is being undertaken to provide a foundation for the actuarial community’s modeling of a variety of economic variables, including interest rates, equity returns, inflation, unemployment rates, and real estate price levels. The specific objectives of this research are to provide a summary of the literature in the area of economic scenario modeling, identify data sources and methodologies in this area useful to the actuarial profession, and produce working software for economic modeling, including appropriate documentation, to be made available to the general actuarial community in order to allow actuaries to use and build upon this research.

Description: Exploration of sources of volatility in retiree health valuations, noting how volatility arises and might be mitigated, with discussion of valuation parameters more problematic for retiree health benefits than for pensions. Three significant influences on retiree health valuation volatility are covered-- changes in benefit level, fluctuations in cost level, and alterations in eligibility for, or duration of, benefit – and attention focused on the last two. Specific conclusions result in recommendations, which are supported by practical examples contrasting volatile measurement results with those likely from the recommended practices. Theoretical discussion includes health claim variation, health trend usage, financial economics, option pricing, discount rates, and deterministic vs. stochastic modeling.

Description: This paper argues that no single valuation basis is completely reliable: neither market price nor other alternatives can accurately measure value. Therefore, this paper proposes that a preferable solution is to simultaneously record two bases of valuation: market price and appraisal value. Thus by expanding the dimensionality of financial reporting, one can provide a broader, richer and more accurate measurement of value. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010

Description: Within this paper, we take an applied approach to examine the economics of ERM. We provide readers with a series of economically based warning signs that might signify significant changes in asset prices. These warning signs are based on the economic concepts of elasticity of demand, elasticity of supply and herd behavior. Our recommendations provide practical guidance to directors, executives and practitioners regarding ways in which they can mitigate risks in today’s volatile environment. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010.

Description: Many risk management decisions involve the timing of implementing risk strategies. The cost of hedging, capital raising and securitization changes with the economic environment. The timing of de-risking and investment in new risk management functions affect the cost and benefit of these projects as well. Like investment timing, it is important to consider the timing in risk management decisions to maximize the gain of risk management projects. This paper discusses methods of determining the appropriate timing of implementing a risk management strategy or investing in risk management projects. It explains the human biases that may lead to inferior timing decisions. It also covers the costs and benefits of risk management projects and the impact of new information on the decision-making process. Timing considerations for financial risk hedging, insurance risk hedging and investment in new risk management projects are explained. Factors used for timing decisions include economic conditions, market volatility, credit rating, borrowing cost, capital adequacy and financial resources.

Description: Many risk management decisions involve the timing of implementing risk strategies. The cost of hedging, capital raising and securitization changes with the economic environment. The timing of de-risking and investment in new risk management functions affect the cost and benefit of these projects as well. Like investment timing, it is important to consider the timing in risk management decisions to maximize the gain of risk management projects. This paper discusses methods of determining the appropriate timing of implementing a risk management strategy or investing in risk management projects. It explains the human biases that may lead to inferior timing decisions. It also covers the costs and benefits of risk management projects and the impact of new information on the decision-making process. Timing considerations for financial risk hedging, insurance risk hedging and investment in new risk management projects are explained. Factors used for timing decisions include economic conditions, market volatility, credit rating, borrowing cost, capital adequacy and financial resources.

Description: This article presents some observations on inverted yield curves of U.S. Treasury securities and the correlation of volatility of Treasury security interest rates with their absolute level. The time covered by the study is December 1953 to December 1988. From Society of Actuaries Financial Reporting Monograph, M-AS99-1.

Description: This paper presents a generalization of the principal current methods of financial decision making. In the way physical sciences benefit from new general theories that encompass those theories they succeed, the science of finance can benefit from the development of a general framework that encompasses many of the current methods of financial analysis. The paper develops a general framework for financial decision-making from a few simple axioms of rational economic behavior.

Description: This paper discusses a problem in corporate finance, the problem of selecting from among a group of possible economic projects. This problem most certainly involves future contingent events and is a natural for consideration by actuaries interested in expanding into non-traditional practice areas.

Description: Chapter 4 describes growth issues including multiple account problems of the old SAR, the amount of money in the AFOREs, and portfolio composition in the AFOREs. From Retrospective and Perspective Analysis of the Privatized Mandatory Pension System in Mexico, M-RS02-1.