Description: Given a financial transaction we are often interested in the number of internal rates of return [yield rates] and their location. From an actuarial point of view, the fundamental question is to identify those transactions with a single yield rate, or a single rate in some interval such as the positive reals. In this paper we are concerned with this counting problem. We survey various results concerning this problem, and provide a unifying approach together with some new insights.

Description: This paper argues that the self-financing axiom with mild assumptions on the conditional expected returns yields a market with an eventual arbitrage. This is accomplished by minimizing the conditional variance of a trade when the conditional expectation is a fixed constant. Examples with common processes shows that most models yield an eventual arbitrage. As a final application, a cost model is applied to prices of stripped coupon and principal payments on U.S. government bonds, where rates of return are estimated and lower bounds on market costs given.

Description: This paper illustrates the application of stochastic control methods in managing the risk associated with an insurance business. We present the Hamilton-Jacobi-Bellman HJB equation and demonstrate its use in finding the optimal investment strategy based on some given criteria. Here we consider an insurance business with a fixed amount available for investment in a portfolio consisting of one non-risky asset and one risky asset. The object of the resulting control problem is to determine the investment strategy that minimizes infinite time ruin probability. The existence of a solution to the resulting HJB equation is shown. The relevant verification lemma is not presented in this paper and a numerical algorithm is given instead. Examples applied to exponential claims are also presented.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.

Description: This report is an update to a 2014 paper related to changes in the continually evolving pension risk transfer landscape. This updated report seeks to discuss pension risk transfer in depth and identify key de-risking actions, alternatives and triggers that impact pension risk transfer strategies.

Description: This teaching session covers primarily hedging strategies, including mechanisms, assumptions, and simulation. Hedging used for guaranteed living benefits on variable annuities is frequently discussed. Session 7TS of the 2005 Valuation Actuary Symposium.

Description: An update on the Investment Section's asset allocation contest

Description: Provides some guidance on how to set a company's investment benchmark.

Description: Panelists discuss: [1] a way to study interest-rate risk using stochastic methods, [2] a conceptual framework needed to evaluate the suitability of an investment strategy for insurance liabilities, and [3] how one company [Capital Holding] develops investment strategies and asset/liability management policies. From the 1988 Record of Society of Actuaries, Vol. 14, No. 2.

Description: This paper explores Indian futures and options market as a market for hedging by equity holders. The authors have tried to examine optimal hedge ratio and hedge efficiency, and to provide empirical evidence from India.