Description: Statistics were invented to describe heterogeneity and are now applied to tackle alea. It may not be appropriate. Let's clarify their field of relevance.

Description: Decomposes guaranteed minimum maturity benefit option into a basket of components, and values each component with both a Black-Scholes model and a regime-switching GARCH model. Performs sensitivity analysis on dynamic lapse assumption.

Description: Feature article discussing hedging programs becoming a mainstay in the risk management arsenal of life insurers. It focuses on the significant stresses on variable annuity hedging programs.

Description: The impact of Fed’s QE program on the financial markets has been enormous and profound. The tapering and the eventual removal of the stimulus will be equally enormous and profound, and may be disruptive. To adapt to the potential regime change in near future, some investment strategies have been proposed: (1) shorten duration to focus on the short end of the yield curve and create laddered portfolios; (2) reduce allocation to high yield bonds; (3) rotate out interest rate sensitive sectors such as utilities; and (4) use interest rate derivatives to hedge the interest rate uncertainties lying ahead. On the other hand, contrarians who see the QE program continuing may stay the course and consider (1) adding duration, (2) gaining exposure to high yield bonds, and (3) increasing allocation to utilities and telecoms.

Description: Explains the method used to calculate Liquidity Cost Score and Price Impact Score. Describes the rationale for and applications of these methods.

Description: Is Risk/Return a sound tool for decision-making? No. It is not consistent, not objective, distorts decision and degrades governance. Why? What shall we do then?

Description: Introduction to option pricing, with special attention to issues in applying these tools to price equity-linked insurance products. Clear, accessible explanation of key results of mathematical finance including risk-neutral valuation.

Description: Introduction to option pricing using Black-Scholes. Discussion on the limitations of Black-Scholes and of its alternatives such as Heston. Clear, accessible explanation of key results of mathematical finance including risk-neutral valuation.

Description: This articles explains why many corporations are making massive reductions in risk related to their pension plans despite the fact that this means locking in costs at a time of historically low interest rates. This should help actuaries working with pension plans or pension investments advise clients on investment strategies and other approaches to de-risking.

Description: Feature article describing how traditional pension asset allocations contain so much risk that the details of the “liability benchmark” have been largely ignored.