Description: Mortality trend risk affects pension plans, life insurers, annuity writers and insurers of workers’ compensation, where the tail claims are mostly annuities. As with many risk sources, mortality risk can be broken down into process risk, parameter risk and model risk. In this paper, process risk, parameter risk and model risk are discussed using the fitted models. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010.

Description: This paper recommends the practical application of new portfolio risk/return measurements to achieved and back tested stock portfolio performance. This new risk measurement process addresses the issue of infinite variances empirically observed in most stock return distributions. From 2007 Enterprise Risk Management Symposium, M-AS07-1.

Description: In response to the risks of embezzlement and branch mis-behavior, this paper describes an operational risk management framework for local Chinese securities companies and a set of tools to manage their branches. From 2007 Enterprise Risk Management Symposium, M-AS07-1.

Description: This paper presents a methodology of pricing the guaranteed minimum death benefit of a variable annuity in a market model with jumps. Recent developments in the stock market make variable annuities very attractive products from the insured point of view, but less attractive for insurers. The insured still has the possibility of investment benefits, while avoiding the risk of a stock market collapse. The insurer wants to minimize its risk and yet sell a competitive product. The financial market model consists of one riskless asset and one risky asset whose price jumps in proportions J at some random times T which correspond to the jump times of a Poisson process. The model describes incomplete markets and there is no perfect hedging. In the second part of the paper, we describe a possible method of risk analysis for binomial tree models.

Description: In a stochastic world consideration of only a few deterministic scenarios can potentially be dangerous. The aim of the present research is to study the computation of the cost of mismatch using stochastic interest rate models instead of scenario testing. In this paper, two commonly used Stochastic interest rate models are considered: the one introduced by Vasicek 1977 and the one proposed by Cox, Ingersoll and Ross 1985.

Description: In this paper, we formulate the Capital Allocation problem as an optimization problem in which we seek the mix of business that maximizes an insurance company’s Expected Net After Tax Income subject to a constraint on the Tail Value at Risk TVAR. Using the method of Lagrange multipliers, we demonstrate that the returns on the respective TVAR contributions, so-called RORAC, are equal across all lines of business when the mix of business is optimal. Although the discussions in this paper center on the TVAR, the conclusions hold true for any conditional expected value measure. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010.

Description: This paper examines the discrepancy that seems to exist between classical financial theory and the widely adopted portfolio selection theory, and proposes that the roles of agents and the interests of corporate insiders need also to be considered. From Current Pension Actuarial Practice in Light of Financial Economics Symposium, M-RS04-1.

Description: This paper takes the position that it is possible to compute annual pension costs without computing liabilities first, or at all, even implicitly. Moreover, such an approach can be shown to have powerful advantages in stochastic financial environments. From Current Pension Actuarial Practice in Light of Financial Economics Symposium, M-RS04-1.

Description: This paper attempts a model for a mix of DB and DC retirement plans that meets the dual objectives of predictability of employer cash contributions, and sufficient employee retirement benefit. From Current Pension Actuarial Practice in Light of Financial Economics Symposium, M-RS04-1.

Description: We propose asymptotically correct two-sided bounds for random sums where the number of summands has an arbitrary distribution which can be viewed as ruin probabilities or accumulated claim sizes in various risk processes. The bounds are fairly new and they reveal the real accuracy of some well-known and widely used asymptotic formulas. It turns out that this accuracy can be poor and the range where these formulas give appropriate approximations depends on the shape of the tail distribution of the summands. This dependence is examined in the research.