Description: This paper provides a novel approach to the valuation of the market value of economic surplus that is stable and immune from “market noise”.

Description: Economic capital models are getting increasingly complex. An alternate copula free approach is presented which uses accounting data and an implicit correlation model to simplify economic capital calculations. Model simplification leads to robust and stable models. A banking case study is used to showcase how the model can be deployed using publicly available accounting data, capital adequacy, leverage ratios and shortfall tools.

Description: An insurance product’s return on required equity demonstrates how successfully its results are covering the company’s basic capital. Using some simplified assumptions, it is possible to calculate this return ratio and decompose it without a full projection of liabilities.

Description: An insurance product’s return on required equity demonstrates how successfully its results are covering the company’s basic capital. Using some simplified assumptions, it is possible to calculate this return ratio and decompose it without a full projection of liabilities.

Description: This paper offers a preliminary exploration of the implications of alternative mandatory annuity designs in a privatized Social Security environment. From Retirement Needs Framework, M-RS00-1.

Description: This paper demonstrates the use of Quantile Regression in the development and understanding of conditional value at risk (VaR) models for enterprise risk management.

Description: Abstract: Project portfolio risk management and risk analysis form one of the critical components of enterprise risk management. Organizations measure and analyze risks associated with projects, project portfolios, and programs. The important step of the process is quantitative risk analysis of project schedules using event chain methodology (ECM). ECM is a stochastic modeling technique for schedule risk analysis. All risks, including schedule and nonschedule-related risks, are assigned to a particular project and within this project to the particular activity or resource. Further, ECM allows one to model the relationship between project risks by defining risks that cause or trigger other risks. All risks and relationships between them will be presented on the project or portfolio Gantt charts using event chain diagrams. After risks are assigned to project and portfolio schedules, Monte Carlo simulation of the project schedule is performed. ECM simplifies complex risk analysis process.

Description: This paper reviews the life cycle of a typical pension plan, examines the issues relating to its funding, and proposes a new funding approach that tries to balance the various concerns. From The Future of Pension Plan Funding and Disclosure Monograph, M-RS05-1.

Description: ERM has methodology for quantifying the risk to capital, but to determine optimal capital, the impact of capital level on firm value is needed. This gets into the realm of valuation. Also capital allocation provides risk quantification for business units, but comparing return among units is fundamentally a risk-pricing exercise. When considering risk pricing, optimal returns on allocated capital are not necessarily constant across business units. The current ERM methodology, as well as actuarial literature on valuation and pricing, are reviewed, and possible directions for application of pricing and valuation methods to risk management problems are outlined.

Description: Abstract: A model for analyzing the probability and severity of default of sovereign entities and banks. The methodology analyzes the risks inherent in the investment of debt of sovereign governments and large financial institutions side-by-side, taking into consideration macroeconomic interactions among the sovereign fiscal and monetary authorities, the financial institutions, and the real economy. The signature aspect of the methodology is that it adapts a Merton-style default model to use explicit measures of sovereign assets and asset volatility.