bluuebunny/crossref_metadata_2025_split huggingface dataset:
Valuation and Hedging of Limited Price Indexed Liabilities
Authors: Huang H.-C. , Cairns A. J. G. 
Published: June 2011

ABSTRACTThis paper considers the market or economic valuation and the hedging of Limited Price Indexed (LPI) liabilities. This involves finding optimal static and dynamic hedging strategies which minimise the riskiness of the investment portfolio relative to the liability.In this paper we do not aim to find the perfect hedge in a perfect world. Instead, it is assumed that optimisation is restricted to three commonly used asset classes in pension funds: cash; long-term (or irredeemable) fixed-interest bonds; and long-dated index-linked bonds. The economic value of the liability is then defined as the value of the best matching portfolio using a mean/variance type of loss function. Specifically, we adopt the risk minimising approach of Föllmer & Sondermann (1986) and Schweizer & Föllmer (1988). Even with such a simple loss function, establishing the theoretically optimal solution can be difficult. We propose that a practical solution close to the theoretical optimum can be found using two approximations. First, we approximate the ‘true’ stochastic economic model by a vector autoregressive model of order one. Second, we use a sequence of linearisations to approximate non-linear by straightforward quadratic minimisation problems.The proposed approach is illustrated with various numerical examples, and we compare the results of the approximately optimal hedging strategy with static strategies.
Quantifying Operational Risk in General Insurance Companies. Developed by a Giro Working Party
Authors: Tripp Michael Howard , Bradley H. L. , Devitt R. , Orros G. C. , Overton G. L. , Pryor L. M. , Shaw R. A. 
Published: June 2011

ABSTRACTThe paper overviews the application of existing actuarial techniques to operational risk. It considers how, working in conjunction with other experts, actuaries can develop a new framework to monitor/review, establish context, identify, understand and decide what to do in terms of the management and mitigation of operational risk. It suggests categorisations of risk to help analyses and proposes how new risk indicators may be needed, in conjunction with more normal quantification approaches.Using a case study, it explores the application of stress and scenario testing, statistical curve fitting (including the application of extreme value theory), causal (Bayesian) modelling and the extension of dynamic financial analysis to include operational risk. It suggests there is no one correct approach and that the choice of parameters and modelling assumptions is critical. It lists a number of other techniques for future consideration.There is a section about how ‘soft issues’ including dominance risk, the impact of belief systems and culture, the focus of performance management systems and the psychology of organisations affect operational risk. An approach to rating the people aspects of risk in parallel with quantification may help give a better overall assessment of risk and improve the understanding for capital implications.The paper concludes with a brief review of implications for reporting and considers what future work will help develop the actuarial contribution. It is hoped the paper will sow seeds for the development of best practice in dealing with operational risk and increase the interest of actuaries in this emerging new topic.
Healthy Life Expectancy Measurement in Scotland
Authors: Macdonald A. S. , Straughn J. , Sutton M. 
Published: June 2011

ABSTRACTHealth expectancy (HE) was only recently estimated for the Scottish population (Clark et al., 2004). The estimates were based on Sullivan's method, applying the morbidity prevalence in each age group to the expected number of years lived, to obtain the expected number of years lived in good health. First, we compare these estimates with a wide range of estimates in respect of the rest of the United Kingdom and the (pre-accession) countries of the European Union. We find that Scotland's HE is relatively low, especially for men. Second, we examine data comprising the responses to the 1998 Scottish Health Survey, linked to the hospital records of the respondents from 1981 to 2004, and death records from 1998 to 2004, with HE measurement in mind. Although time spent in hospital does not give a satisfactory measure of HE, the linkage presents a rare opportunity for statistical analysis of survey respondents' mortality and morbidity. We show the results of survival analyses, quantifying the effectiveness of various definitions of ‘unhealthy’ as predictors of future mortality and morbidity. The results suggest that enumerating recent serious hospital episodes might help to predict future patterns of demand for acute services.
Effective Decision Making in a Life Company
Authors: Iqbal M. 
Published: June 2011

ABSTRACTIn the recent past life companies have made many decisions which they have had cause to deeply regret. This paper looks at the range of decision making theories available. It then examines recent examples of decisions that had unfavourable consequences and explores why they were taken, and goes on to describe a systematic approach to decision making which can help management assess more objectively the difficult choices confronting them today. The approach does not require espousal of any specific decision theory or method of value measurement. The focus is on the decision making process and the organisation's capacity to handle change. The paper identifies the three requirements for effective decision making.
Merging With-Profits and Unit-Linked Life Funds in a Proprietary Company: Actuarial Considerations Based on a Case Study
Authors: Paul R.M. 
Published: June 2011

ABSTRACTIn the current financial climate takeovers of proprietary life companies by other life companies, amalgamations of mutuals and demutualisations have become more and more prevalent. However in respect of takeovers, the process does not end with the purchase, but normally results in the transfer of the long-term business of one of the companies to the other. To optimise synergy and administrative efficiency, there may be a need to reconstruct the amalgamated funds.The author has been involved as Appointed Actuary and internal project manager in such transfers of business within proprietary companies and has also acted as an independent actuary and as an external project manager for other transfers. One of these transfers involved four companies transacting both with-profits and unit-linked business in which the interests of both policyholders and shareholder had to be protected. He considered this transfer to be of sufficient interest to merit the preparation of a paper discussing the issues which arose. Although the paper is principally based on that transfer as a case study, relevant and related factors arising in other transfers have been included where appropriate, as have references to the role of the actuary before, during and after reconstruction.In the case study, the scheme of transfer and the associated reconstruction of corporate structure involved merging three separate with-profits funds, merging many unit-linked funds (including unitised with-profits) and, subject to appropriate compensation, rationalisation of the rights to surplus attributable to both with-profits policyholders and shareholder.
Stochastic Claims Reserving in General Insurance
Authors: England P.D. , Verrall R.J. 
Published: June 2011

ABSTRACTThis paper considers a wide range of stochastic reserving models for use in general insurance, beginning with stochastic models which reproduce the traditional chain-ladder reserve estimates. The models are extended to consider parametric curves and smoothing models for the shape of the development run-off, which allow extrapolation for the estimation of tail factors. The Bornhuetter-Ferguson technique is also considered, within a Bayesian framework, which allows expert opinion to be used to provide prior estimates of ultimate claims. The primary advantage of stochastic reserving models is the availability of measures of precision of reserve estimates, and in this respect, attention is focused on the root mean squared error of prediction (prediction error). Of greater interest is a full predictive distribution of possible reserve outcomes, and different methods of obtaining that distribution are described. The techniques are illustrated with examples throughout, and the wider issues discussed, in particular, the concept of a ‘best estimate’; reporting the variability of claims reserves; and use in dynamic financial analysis models.
Stochastic Investment Modelling: a Multiple Time-Series Approach
Authors: Chan W.S. 
Published: June 2011

ASBTRACTIn this paper we adopt the multiple time-series modelling approach suggested by Tiao & Box (1981) to construct a stochastic investment model for price inflation, share dividends, share dividend yields and long-term interest rates in the United Kingdom. This method has the advantage of being direct and transparent. The sequential and iterative steps of tentative specification, estimation and diagnostic checking parallel those of the well-known Box-Jenkins method in the univariate time-series analysis. It is not required to specify anya prioricausality as compared to some other stochastic asset models in the literature.
Why Arbitrate? (Staple Inn Reading 2002)
Authors: Butcher Anthony 
Published: June 2011

ABSTRACTThe lecture considers the subject of arbitration as a means of determining otherwise irreconcilable disputes. Although arbitration may be required over a wide range of subjects, the lecturer's considerable experience has been in the area of construction. He outlines how arbitration was carried out in the 1950s and the relationship between arbitrators and arbitrations and the courts. Since that time there have been radical changes to improve the system, and these are described, particularly the various Acts of Parliament relevant to the subject. The lecturer concludes that currently construction arbitration is in good heart, but that too much paper is still being generated.
The Use of Utility Functions for Investment Channel Choice in Defined Contribution Retirement Funds. II: A Proposed System
Authors: Thomson R. J. 
Published: June 2011

ABSTRACTIn this paper a system for recommending investment channel choices to members of defined contribution retirement funds is proposed. The system is interactive, using a member's answers to a series of questions to derive a utility function. The observed values are interpolated by means of appropriate formulae to produce a smooth utility function over the whole positive range of benefits at retirement. The resulting function, together with stochastic models of the returns on the available channels and of the annuity factor at exit, is then used to recommend an optimum apportionment of the member's investment. The proposed system is applied to the observed values of utility functions of post-retirement income elicited from members of retirement funds. Difficulties in the application are discussed and the results are analysed. The sensitivity of the recommendations to the parameters of the stochastic model is discussed.
Reserving, Pricing and Hedging for Policies with Guaranteed Annuity Options. Reserving for Annuity Guarantees: Reference Paper for the Discussion
Authors: Wilkie A. D. , Waters H. R. , Yang S. , Bolton M. J. , Carr D. H. , Collis P. A. , George C. M. , Knowles V. P. , Whitehouse A. J. 
Published: June 2011

ABSTRACTThis report, which was sponsored by the Life Board of the Faculty and Institute of Actuaries, was originally published in November 1997.Because it is referred to several times in the paper ‘Reserving, Pricing and Hedging for Policies with Guaranteed Annuity Options’, and in the discussions of the paper, and because it is not easily accessible elsewhere, it is printed here as a background paper for reference.
Background Risk and Pensions
Authors: Cardinale M. , Katz G. , Kumar J. , Orszag J. M. 
Published: June 2011

ABSTRACTThis paper explores the effect of unhedgeable background risks such as mortality and labour risks (such as wages and turnover) on pension funding and finance. We explore the literature on the economics and finance of background risk, and discuss its applicability to pensions. Most of the results in economics apply to the special case of additive background risk, which is part of, but not all of, the background risk faced by pension funds. We develop three illustrative models and show the impact of background risk on pension funding and asset allocation. We find that the asset allocation and funding decisions of pension plans in general change with the introduction of background risk, in some cases significantly. We also explore implications of background risk for fair value calculations.
The Cost of Capital for Financial Firms
Authors: Exley C. J. , Smith A. D. 
Published: June 2011

ABSTRACTMost businesses have assets financed by capital providers. The cost of capital is a measure of the returns required by those capital providers. Its main use is to set a target for the profits, which must be achieved on the firm's assets in order to satisfy equity and bond holders.This paper describes the classical theory of the cost of capital, and then applies it to the special case of banking and insurance firms. We develop implications for product pricing, performance measurement and capital structure optimisation.
Financial Economics — an Investment Actuary's Viewpoint
Authors: Clarkson R.S. 
Published: June 2011

ABSTRACTThe paper compares and contrasts the theories and methodologies of financial economics with generalisations drawn from practical experience of institutional investment management. A Dynamic Equilibrium Model is put forward as a much more realistic theoretical framework than the Sharpe Diagonal Model, a downside theory of risk is developed from sports analogies, and a detailed model of human behaviour, incorporating benchmark levels of ‘unintelligent’, ‘intelligent’, ‘optimal’ and ‘rational’ behaviour, is suggested as a replacement for the very restrictive simplifying assumptions of existing theories. On the basis of a classification system derived from parallels with the history of astronomy, it is concluded that, as a scientific framework, the current theories of financial economics are seriously incomplete, the two crucial areas of incompleteness being the absence of a downside theory of risk and the absence of a realistic model of human behaviour under conditions of risk and uncertainty.
Life Insurance Accounting at Current Values: A Danish View
Authors: Ramlau-Hansen H. 
Published: June 2011

ABSTRACTTraditional life insurance accounting standards rely on various types of book and cost values, the result being that the income and balance sheet statements do not necessarily give a true and transparent picture of the result of the life business. As examples, assets are typically stated at a mix of cost, current and amortised cost values, whereas life insurance provisions are calculated according to the approved technical basis.In this paper, it is suggested that this deficiency can be corrected by preparing life insurance accounts at current value. The proposed method implies that the life insurance provisions shall amount to the present value of the company's net liabilities to the policyholders including a provision for future bonus distribution. Moreover, any unrealized investment reserves are thrown into light, and it is shown how a bonus equalization provision at current value may serve as a key indicator of the financial strength of the company.The method has been designed primarily for the Danish market, but aspects of the method should be of relevance more widely.Finally, the results are illustrated by a number of numerical examples.
An International Comparison of Recent Trends in Population Mortality
Authors: Macdonald A.S. , Cairns A.J.G. , Gwilt P.L. , Miller K.A. 
Published: June 2011

ABSTRACTThis survey continues a series of international mortality comparisons, of which the most recent were Giles & Wilkie (1973) and Wilkie (1976). The first part of the paper is a descriptive survey of mortality data from United Nations sources over the period 1970-90. The second part is based on short reports prepared by contributors from the actuarial associations in various countries, and aims in particular to provide a comprehensive bibliography.
Forecasting U.K. Population Mortality Allowing for Age, Period and Cohort Effects
Authors: Forfar D. O. 
Published: June 2011

ABSTRACTThe mortality data (registered deaths and population size) over the years 1961–2007 for the population of England and Wales and for Scotland were obtained from the Office for National Statistics (ONS) and from the Scottish Registrar General. This paper addresses the following questions:(i) Is there statistical evidence for a cohort effect (i.e. a generation effect separate from the period effect) being present in the data?(ii) Do both males and females exhibit similar cohort (generation) effects?(iii) Are period effects (i.e. the improvement in mortality with time) more significant than cohort effects?(iv) How should one allow, in forecasts of population mortality, for age, period and cohort effects?(v) Is it sensible to combine male and female mortality experience to determine the period effect and the cohort effect?(vi) How do the forecasts for the expectation of life at birth, using the Extended-Lee–Carter-Combined (ELCC) model (described in the paper) differ from the (2008 based) Office of National Statistics (ONS) forecasts of the expectation of life at birth?
Influenza Recycling and Secular Trends in Mortality and Natality
Authors: Azambuja Maria Inês Reinert 
Published: June 2011

ABSTRACTSecular variations in longevity and in population aging are of huge interest to actuaries. It is shown here that temporal changes in mortality and natality accompany the recycling of influenza A viruses i.e., the re-exposure of human populations, from time to time, to influenza A viruses antigenically similar to viruses (H1, H2, H3) that circulated in the past. Mortality (and natality) change as birth cohorts (whole population and maternal) with specific types and levels of vulnerability to influenza A re-infections, acquired through early-life effects of infection with one (period-specific) influenza A sub-type, course through subsequent influenza A environments over time. Epidemiologic evidence of association between secular trends in mortality (and natality) and interactions between birth-cohort and period effects of influenza A circulation is presented both for the U.K. and the U.S. New interpretations to several epidemiologic and demographic observations follow from this finding.
A New Model of Ageing and Mortality
Authors: Milne Eugene M. G. 
Published: June 2011

ABSTRACTThe Nested Binomial Model presented in this paper is a new approach to modelling mortality and survival in humans and other species that seeks to reconcile individual life course risk trajectories and those population mortality patterns that arise from inter-individual heterogeneity. In describing individual trajectories it partitions mortality risk into two main elements: ‘redundancy’ and ‘interactive risk'. Interactive risk is volatile, increasing or decreasing with time and circumstance, while redundancy is a quantity which declines in a linear and largely invariable fashion throughout life. Although a biological correlate for redundancy is not identified, this assumption allows strikingly realistic modelling of mortality and survival curves, late-life mortality deceleration, Strehler-Mildvan correlation, mortality plateaux and slowing of mortality. Simple assumptions with regard to heterogeneity of parameters within the model allow close approximation to the entire human mortality curve, and provide a rationale for observed and otherwise paradoxical population mortality phenomena. As such, it fulfils biodemographic criteria for a comprehensive theory of ageing. Future challenges are to reconcile its theoretical structure with empirical findings in the biology of ageing and to render it in a form that can become a usable actuarial tool.
Glow Gel Hand Washing in the Waiting Room: A Novel Approach to Improving Hand Hygiene Education
Authors: Fishbein Anna B. , Tellez Itza , Lin Henry , Sullivan Christine , Groll Mary E. 
Published: June 2011

Objectives.To characterize handwashing behaviors of children and assess the efficacy of a waiting room-based hand hygiene intervention at improving handwashing ability.Design.Prospective randomized pilot study.Setting.Emergency department waiting room at a freestanding urban pediatric hospital.Participants.Children (8–18 years) and their parent.Intervention.Participants were randomized to glow gel hand washing without hand hygiene education or glow gel hand washing with hand hygiene education. After participants washed with glow gel, “dirty areas” were illuminated using a black light, and hands were scored. A questionnaire about handwashing behavior was administered. All subjects returned 2–4 weeks after intervention to repeat glow gel hand washing and the questionnaire.Results.Sixty pediatric patients and 57 parents were recruited, with 77% of patients returning for follow up. Patients were 50% male, 58% Latino, 28% African American, and 8% Caucasian. At the initial visit, 91% of children reported hand washing after using the bathroom and 78% reported hand washing before dinner. On the basis of objective scoring, all children improved handwashing ability when compared with the initial visit (P = .02) and were more likely to use warm water at follow up (P = .01). Parents did not significantly improve in handwashing ability (P = .73).Conclusion.Glow gel hand washing is an effective method to improve children's handwashing ability. This short-term intervention was effective even in the absence of specific hand hygiene education. This intervention could serve as a valuable public health measure to teach hand washing in healthcare settings.
Coagulase-Negative Staphylococcal Infections in the Neonatal Intensive Care Unit
Authors: Jean-Baptiste Naomi , Benjamin Daniel K. , Cohen-Wolkowiez Michael , Fowler Vance G. , Laughon Matthew , Clark Reese H. , Smith P. Brian 
Published: June 2011

Background.Coagulase-negative staphylococci (CoNS) are the most commonly isolated pathogens in the neonatal intensive care unit (NICU). CoNS infections are associated with increased morbidity, including neurodevelopmental impairment.Objective.To describe the epidemiology of CoNS infections in the NICU. To determine mortality among infants with definite, probable, or possible CoNS infections.Methods.We performed a retrospective cohort study of all blood, urine, and cerebrospinal fluid cultures from samples obtained from infants aged <121 postnatal days.Setting.A total of 248 NICUs managed by the Pediatrix Medical Group from 1997 to 2009.Results.We identified 16,629 infants with 17,624 episodes of CoNS infection: 1,734 (10%) definite, 3,093 (17%) probable, and 12,797 (73%) possible infections. Infants with a lower gestational age and birth weight had a higher incidence of CoNS infection. When controlling for gestational age, birth weight, and 5-minute Apgar score, we found that infants with definite, probable, or possible CoNS infection had lower mortality (odds ratio [OR], 0.74 [95% confidence interval {CI}: 0.61, 0.89], 0.68 [95% CI, 0.59, 0.79], and 0.69 [95% CI, 0.63, 0.76], respectively) compared with infants who had negative culture results (P<.001). No significant difference in overall mortality was found in infants who had definite CoNS infection compared with those who had probable or possible CoNS infection (OR, 0.93 [95% CI, 0.75, 1.16] and 0.85 [95% CI,0.70,1.03], respectively).Conclusions.CoNS infection was strongly related to lower gestational age and birth weight. Infants with clinical sepsis and culture-positive CoNS infection had lower mortality rates than infants with clinical sepsis and negative blood culture results. No difference in mortality between infants with a diagnosis of definite, probable, or possible CoNS infection was observed.