Description: We analyze how volatility management techniques in VAs affected policyholders and insurance companies

Description: This paper describes the use of the Moses software package to model variable annuities with multiple guarantees. Pricing and risk management are discussed.

Description: Target volatility, as an investment strategy, has been used by many funds not only as a way to smooth return but also as a way to manage risks of the VA guarantees. Contrary to existing research which favors volatility targeting over fixed allocation, this article shows that because of the existence of market jump risk, target volatility strategy does not necessarily offer an improved risk profile for VA writers. Further, target volatility coupled with leveraging can significantly increase tail risk for insurance companies.

Description: This article provides background on managed target volatility funds and how they can be used for variable annuities and the mitigation of gap risk.

Description: This paper demonstrates that extreme value theory (EVT) can be used as a tool to model policyholder behavior in the extreme tail. This paper applies EVT to the study of variable annuity dynamic lapse behavior in the extreme tail. It illustrates a process whereby a company can fully model policyholder behavior, including the extreme tail, with existing data. No judgment about the extremal behavior is necessary.

Description: Discussion of possible hedging strategies for offsetting the investment risk for variable annuities, especially those with guaranteed benefits.

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: Derives appropriate hedge ratios for CPPI strategies, taking into account discrete hedge times and market dislocations (gap risk).

Description: New Zealand is about to launch its first variable annuity with guaranteed lifetime withdrawal benefits. The product design is mindful of the lessons from the financial crisis in the United States, Europe and Japan.

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.