scholarly journals A new approach for satisfactory pensions with no guarantees

2019 ◽  
Vol 10 (1) ◽  
pp. 3-21
Author(s):  
M. Carmen Boado-Penas ◽  
Julia Eisenberg ◽  
Axel Helmert ◽  
Paul Krühner
Keyword(s):  
Risk Management ◽  
Interest Rates ◽  
Asset Management ◽  
Expected Return ◽  
New Approach ◽  
Low Interest Rates ◽  
Key Variables ◽  
Pension Benefits ◽  
Pension Payments ◽  
Over Time

AbstractThe increase in longevity, the ultra-low interest rates and the guarantees associated to pension benefits have put significant strain on the pension industry. Consequently, insurers need to be in a financially sound position while offering satisfactory benefits to participants. In this paper, we propose a pension design that goes beyond the idea of annuity pools and unit-linked insurance products. The purpose is to replace traditional guarantees with low volatility, mainly achieved by collective smoothing algorithms and an adequate asset management. With the aim of offering security to the insured, we discuss the optimisation of some key variables of the proposed pension product to target both a satisfactory level of the initial pension and stable pension payments over time. By combining such well-known products as unit-linked and annuities, we show that it is possible to design a pension product with both high-expected return and low risk for the policyholder. However, differently than in the classical unit-linked framework, we do not allow the individuals to choose the underlying funds. Instead, the funds are under the surveillance of an insurance company’s professional risk management, which induces better informed decisions.

Regulated Sharing Economy in the New Normal

2021 ◽  
pp. 1-19
Author(s):  
Volkan Kaymaz
Keyword(s):  
Interest Rates ◽  
Sharing Economy ◽  
2008 Financial Crisis ◽  
Main Motivation ◽  
Access To Credit ◽  
Consumption Expenditures ◽  
Low Interest Rates ◽  
The 2008 Financial Crisis ◽  
Traditional Economy ◽  
Over Time

The sharing economy developed rapidly with the increase in consumption expenditures in a period when low interest rates and access to credit were easy before the 2008 Financial Crisis and entered into serious competition with companies operating in the traditional economy. The use of sharing economy tools has increased as a result of sustainability, environmentalism, desire for new experiences, local tourism, and authentic searches. The sharing economy, whose main motivation is to reintroduce idle products to the market, has changed its priorities over time and turned into a profit-oriented structure, and large companies increased their revenues by increasing the number of users. The criticisms emerging as a result of employment losses, reservation cancellations, reimbursement requests, lack of social security of employees, and therefore not being able to benefit from COVID-19 aids have revealed the missing parts of the sharing economy.

scholarly journals Management of Energy Recourses, Marginal Input- Output Coefficients, and Layers of Techniques: A Case Study of US Chemical Industry

2007 ◽  
Vol 46 (4II) ◽  
pp. 517-536 ◽  
Author(s):  
Toseef Azid ◽  
Mumtaz Anwar ◽  
M. Junaid Khawaja
Keyword(s):  
Interest Rates ◽  
Input Output ◽  
Change Over Time ◽  
New Approach ◽  
Price Structure ◽  
Fixed Price ◽  
Current Price ◽  
The Cost ◽  
Over Time

The embodied technical change should reduce the cost of production of the commodity. However, price structure, wages and interest rates also will change over time. Thus if a commodity is following a fixed price regime, the adjustment of a historical input-output table to current price wage level will leaves less and less profit per unit of output. The extent of this reduction will indicate the extent of technological change. There are different approaches to the prediction of changes in input-output coefficients. The first approach, attributable to Leontief (1941) and Stone (1962), assumes that input-output matrices change over time in a “biproportional” way. The other approach is to estimate trends in individual coefficients using statistical data. Former approach is used by a number of experts, including Fontela, et al. (1970), Almon, et al. (1974) and Carter (1970). Arrow and Hoffenberg (1959), Henry (1974), Savaldson (1970, 1976), Ozaki (1976), Aujac (1972) and Buzunov (1970). These are examples of the application of the quantitative approach for forecasting input-output coefficients. Still another approach which could not get much attention for forecasting input-output coefficients, is constructing the marginal input-output coefficients [Tilanus (1967); Middelhoek (1970)]. Marginal coefficients for forecasting constructed by Tilanus and Middelhoek are based on average input-output tables, which shows that still new approach (marginal) is based on the old (average) one

scholarly journals Funding Defined Benefit pension schemes: an integrated risk management approach

2019 ◽  
Vol 24 ◽  
Author(s):  
C. A. Cowling ◽  
H. J. Fisher ◽  
K. J. Powe ◽  
J. P. Sheth ◽  
M. W. Wright
Keyword(s):  
Risk Management ◽  
Interest Rates ◽  
Management Approach ◽  
Defined Benefit ◽  
Integrated Risk ◽  
Low Interest Rates ◽  
Actuarial Methods ◽  
Fit For Purpose ◽  
Integrated Risk Management ◽  
Pensions Regulator

AbstractThe last 12 years have seen the evolution of a new funding regime under the supervision of the Pensions Regulator. Over this period, there has been significant turbulence in financial markets, including record low interest rates. This paper takes a critical look at the development of funding approaches and methodologies over this period. It analyses the Pensions Regulator guidance and how scheme specific actuarial methods have emerged since the move away from the Minimum Funding Requirement in 2001 and the introduction of the Scheme Specific Funding Requirements in 2005. It asks whether these new methodologies have been successful from the perspective of members, trustees, employers and shareholders. At a time when actuarial valuation methodologies have faced considerable criticism, this paper aims to propose a pension funding methodology which is fit for purpose and also reflects the latest guidance from the Pensions Regulator on integrated risk management.

scholarly journals Impact of declining interest rates on European primary bond market

2017 ◽  
Vol 14 (2) ◽  
pp. 328-335
Author(s):  
Robert Verner ◽  
Peter Remiáš
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Public Debt ◽  
Global Market ◽  
Bond Market ◽  
Debt Financing ◽  
Political Risks ◽  
Low Interest Rates ◽  
The Impact ◽  
Over Time

The aim of this paper is to examine the growing popularity of debt financing in European based subjects. The development of issued volume was examined on the sample of 9,293 public debt offerings denominated in EUR issued between 30th November 2007 and 30th November 2016 and the impact of declining market interest rates on primary bond market was explored. More than 7.666 trillion EUR of debt were analyzed and the results indicate that despite low interest rates, the volume of issued bonds does not increase over time. Decline of interest rates only compensates slow economic growth as well as increasing global market and political risks.

Remaking Retirement

2020 ◽  
Keyword(s):  
Interest Rates ◽  
Older Workers ◽  
Older Persons ◽  
The United States ◽  
Older Population ◽  
The Past ◽  
Cost Of Education ◽  
The World ◽  
Low Interest Rates ◽  
Key Aspects

Around the world, people nearing and entering retirement are holding ever-greater levels of debt than in the past. This is not a benign situation, as many pre-retirees and retirees are stressed about their indebtedness. Moreover, this growth in debt among the older population may render retirees vulnerable to financial shocks, medical care bills, and changes in interest rates. Contributors to this volume explore key aspects of the rise in debt across older cohorts, drill down into the types of debt and reasons for debt incurred by the older population, and review policies to remedy some of the financial problems facing older persons, in the United States and elsewhere. The authors explore which groups are most affected by debt, and they also identify the factors causing this important increase in leverage at older ages. It is clear that the economic and market environments are influential when it comes to saving and debt. Access to easy borrowing, low interest rates, and the rising cost of education have had important impacts on how much people borrow, and how much debt they carry at older ages. In this environment, the capacity to manage debt is ever more important as older workers lack the opportunity to recover for mistakes.

scholarly journals Risk Management for Bonds with Embedded Options

Mathematics ◽  
2020 ◽  
Vol 8 (5) ◽  
pp. 790
Author(s):  
Antonio Díaz ◽  
Marta Tolentino
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Interest Rate Risk ◽  
Interest Rate Models ◽  
Management Measures ◽  
Interest Rate Risk Management ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Rate Change

This paper examines the behavior of the interest rate risk management measures for bonds with embedded options and studies factors it depends on. The contingent option exercise implies that both the pricing and the risk management of bonds requires modelling future interest rates. We use the Ho and Lee (HL) and Black, Derman, and Toy (BDT) consistent interest rate models. In addition, specific interest rate measures that consider the contingent cash-flow structure of these coupon-bearing bonds must be computed. In our empirical analysis, we obtained evidence that effective duration and effective convexity depend primarily on the level of the forward interest rate and volatility. In addition, the higher the interest rate change and the lower the volatility, the greater the differences in pricing of these bonds when using the HL or BDT models.

scholarly journals Special Issue “Interplay between Financial and Actuarial Mathematics”

Risks ◽  
2021 ◽  
Vol 9 (8) ◽  
pp. 139
Author(s):  
Corina Constantinescu ◽  
Julia Eisenberg
Keyword(s):  
Machine Learning ◽  
Control Theory ◽  
Option Pricing ◽  
Interest Rates ◽  
Financial Mathematics ◽  
Special Issue ◽  
Actuarial Mathematics ◽  
Mortality Models ◽  
Low Interest Rates

The Special Issue aims to highlight the interaction between actuarial and financial mathematics, which, due to the recent low interest rates and implications of COVID-19, requires an interlace between actuarial and financial methods, along with control theory, machine learning, mortality models, option pricing, hedging, unit-linked contracts and drawdown analysis, among others [...]

scholarly journals Methodology and Models for Individuals’ Creditworthiness Management Using Digital Footprint Data and Machine Learning Methods

Mathematics ◽  
2021 ◽  
Vol 9 (15) ◽  
pp. 1820
Author(s):  
Ekaterina V. Orlova
Keyword(s):  
Interest Rates ◽  
Additional Data ◽  
Risk Level ◽  
Gradient Boosting ◽  
Cluster Number ◽  
New Approach ◽  
Credit Risks ◽  
Stochastic Gradient Boosting ◽  
The Stability ◽  
Digital Footprints

This research deals with the challenge of reducing banks’ credit risks associated with the insolvency of borrowing individuals. To solve this challenge, we propose a new approach, methodology and models for assessing individual creditworthiness, with additional data about borrowers’ digital footprints to implement comprehensive analysis and prediction of a borrower’s credit profile. We suggest a model for borrowers’ clustering based on the method of hierarchical clustering and the k-means method, which groups actual borrowers having similar creditworthiness and similar credit risks into homogeneous clusters. We also design the model for borrowers’ classification based on the stochastic gradient boosting (SGB) method, which reliably determines the cluster number and therefore the risk level for a new borrower. The developed models are the basis for decision making regarding the decision about lending value, interest rates and lending terms for each risk-homogeneous borrower’s group. The modified version of the methodology for assessing individual creditworthiness is presented, which is to reduce the credit risks and to increase the stability and profitability of financial organizations.

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