scholarly journals The Impact of Management Fees on the Pricing of Variable Annuity Guarantees

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 103
Author(s):  
Jin Sun ◽  
Pavel Shevchenko ◽  
Man Fung
Keyword(s):  
Numerical Experiments ◽  
Downside Risk ◽  
Equity Market ◽  
Retirement Income ◽  
Variable Annuities ◽  
Management Fees ◽  
Market Friction ◽  
Market Management ◽  
Retirement Fund ◽  
The Impact

Variable annuities, as a class of retirement income products, allow equity market exposure for a policyholder’s retirement fund with optional guarantees to limit the downside risk of the market. Management fees andguarantee insurance fees are charged respectively for the market exposure and for the protection from the downside risk. We investigate the pricing of variable annuity guarantees under optimal withdrawal strategies when management fees are present. We consider from both policyholder’s and insurer’s perspectives optimal withdrawal strategies and calculate the respective fair insurance fees. We reveal a discrepancy where the fees from the insurer’s perspective can be significantly higher due to the management fees serving as a form of market friction. Our results provide a possible explanation of lower guarantee insurance fees observed in the market than those predicted from the insurer’s perspective. Numerical experiments are conducted to illustrate the results.

scholarly journals Immunization Strategies for Funding Multiple Inflation-Linked Retirement Income Benefits

Risks ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 60
Author(s):  
Cláudia Simões ◽  
Luís Oliveira ◽  
Jorge M. Bravo
Keyword(s):  
Interest Rate ◽  
Yield Curve ◽  
Risk Measure ◽  
Management Strategies ◽  
Interest Rate Risk ◽  
Insurance Companies ◽  
Retirement Income ◽  
Investment Strategies ◽  
Immunization Strategies ◽  
The Impact

Protecting against unexpected yield curve, inflation, and longevity shifts are some of the most critical issues institutional and private investors must solve when managing post-retirement income benefits. This paper empirically investigates the performance of alternative immunization strategies for funding targeted multiple liabilities that are fixed in timing but random in size (inflation-linked), i.e., that change stochastically according to consumer price or wage level indexes. The immunization procedure is based on a targeted minimax strategy considering the M-Absolute as the interest rate risk measure. We investigate to what extent the inflation-hedging properties of ILBs in asset liability management strategies targeted to immunize multiple liabilities of random size are superior to that of nominal bonds. We use two alternative datasets comprising daily closing prices for U.S. Treasuries and U.S. inflation-linked bonds from 2000 to 2018. The immunization performance is tested over 3-year and 5-year investment horizons, uses real and not simulated bond data and takes into consideration the impact of transaction costs in the performance of immunization strategies and in the selection of optimal investment strategies. The results show that the multiple liability immunization strategy using inflation-linked bonds outperforms the equivalent strategy using nominal bonds and is robust even in a nearly zero interest rate scenario. These results have important implications in the design and structuring of ALM liability-driven investment strategies, particularly for retirement income providers such as pension schemes or life insurance companies.

scholarly journals Long-Term Sustainable Investment for Retirement

2021 ◽  
Vol 13 (9) ◽  
pp. 5000
Author(s):  
Iqbal Owadally ◽  
Jean-René Mwizere ◽  
Neema Kalidas ◽  
Kalyanie Murugesu ◽  
Muhammad Kashif
Keyword(s):  
Mutual Funds ◽  
Performance Metrics ◽  
Retirement Income ◽  
Retirement Plans ◽  
Full Account ◽  
Investment Performance ◽  
Management Fees ◽  
Sustainable Investment ◽  
Managed Funds

We consider whether sustainable investment can deliver performance comparable to conventional investment in investors’ long-term retirement plans. On the capital markets, sustainable investment can be achieved through various instruments and strategies, one of them being investment in mutual funds that subscribe to ESG (environmental, social, and governance) principles. First, we compare the investment performance of ESG funds with matched conventional funds over the period 1994–2020, in Europe and the U.S. We find no significant evidence of differing performance (at 5% level) despite using a number of investment performance metrics. Second, we perform a historical backtest to model a UK personal retirement plan from 2000 till 2020, taking full account of investment management fees and transaction costs. We find that investing in an index-tracker fund overlaid with ESG screening delivers a pension which is 10.4% larger than is achieved if the index-tracker fund is used without screening. This is also 20.2% larger than is achieved by investing in a collection of actively managed funds with a sustainable purpose. We conclude that an ESG-screened long-term passive investment approach for retirement plans is likely to be successful in satisfying the twin objectives of a secure retirement income and of sustainability.

scholarly journals Light a lamp and look at the stock market

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Radeef Chundakkadan
Keyword(s):  
Stock Market ◽  
Financial Distress ◽  
Investor Sentiment ◽  
Downside Risk ◽  
Bond Yields ◽  
Risky Assets ◽  
Market Participants ◽  
Market Return ◽  
The Impact

AbstractIn this study, we investigate the impact of the light-a-lamp event that occurred in India during the COVID-19 lockdown. This event happened across the country, and millions of people participated in it. We link this event to the stock market through investor sentiment and misattribution bias. We find a 9% hike in the market return on the post-event day. The effect is heterogeneous in terms of beta, downside risk, volatility, and financial distress. We also find an increase (decrease) in long-term bond yields (price), which together suggests that market participants demanded risky assets in the post-event day.

scholarly journals Comprehensive Analytical Modelling of an Absolute pH Sensor

Sensors ◽  
2021 ◽  
Vol 21 (15) ◽  
pp. 5190
Author(s):  
Cristina Medina-Bailon ◽  
Naveen Kumar ◽  
Rakshita Pritam Singh Dhar ◽  
Ilina Todorova ◽  
Damien Lenoble ◽  
...  
Keyword(s):  
Silicon Dioxide ◽  
Numerical Experiments ◽  
Ph Sensor ◽  
Hafnium Dioxide ◽  
Matlab Code ◽  
Oxide Degradation ◽  
Depletion Width ◽  
Ion Activity ◽  
The Absolute ◽  
The Impact

In this work, we present a comprehensive analytical model and results for an absolute pH sensor. Our work aims to address critical scientific issues such as: (1) the impact of the oxide degradation (sensing interface deterioration) on the sensor’s performance and (2) how to achieve a measurement of the absolute ion activity. The methods described here are based on analytical equations which we have derived and implemented in MATLAB code to execute the numerical experiments. The main results of our work show that the depletion width of the sensors is strongly influenced by the pH and the variations of the same depletion width as a function of the pH is significantly smaller for hafnium dioxide in comparison to silicon dioxide. We propose a method to determine the absolute pH using a dual capacitance system, which can be mapped to unequivocally determine the acidity. We compare the impact of degradation in two materials: SiO2 and HfO2, and we illustrate the acidity determination with the functioning of a dual device with SiO2.

The impact of H-share derivatives on the underlying equity market

2008 ◽  
Vol 32 (3) ◽  
pp. 235-267 ◽  
Author(s):  
Steven Shuye Wang ◽  
Wei Li ◽  
Louis T. W. Cheng
Keyword(s):  
Equity Market ◽  
The Impact ◽  
H Share

scholarly journals The impact of rheological uncertainty on dynamic topography predictions

Solid Earth ◽  
2019 ◽  
Vol 10 (6) ◽  
pp. 2167-2178 ◽  
Author(s):  
Ömer F. Bodur ◽  
Patrice F. Rey
Keyword(s):  
Mantle Convection ◽  
Numerical Experiments ◽  
Mantle Flow ◽  
Dynamic Topography ◽  
Density Anomaly ◽  
Low Viscosity ◽  
Local Reduction ◽  
Dynamic Components ◽  
Mantle Rheology ◽  
The Impact

Abstract. Much effort is being made to extract the dynamic components of the Earth's topography driven by density heterogeneities in the mantle. Seismically mapped density anomalies have been used as an input into mantle convection models to predict the present-day mantle flow and stresses applied on the Earth's surface, resulting in dynamic topography. However, mantle convection models give dynamic topography amplitudes generally larger by a factor of ∼2, depending on the flow wavelength, compared to dynamic topography amplitudes obtained by removing the isostatically compensated topography from the Earth's topography. In this paper, we use 3-D numerical experiments to evaluate the extent to which the dynamic topography depends on mantle rheology. We calculate the amplitude of instantaneous dynamic topography induced by the motion of a small spherical density anomaly (∼100 km radius) embedded into the mantle. Our experiments show that, at relatively short wavelengths (<1000 km), the amplitude of dynamic topography, in the case of non-Newtonian mantle rheology, is reduced by a factor of ∼2 compared to isoviscous rheology. This is explained by the formation of a low-viscosity channel beneath the lithosphere and a decrease in thickness of the mechanical lithosphere due to induced local reduction in viscosity. The latter is often neglected in global mantle convection models. Although our results are strictly valid for flow wavelengths less than 1000 km, we note that in non-Newtonian rheology all wavelengths are coupled, and the dynamic topography at long wavelengths will be influenced.

scholarly journals ENHANCED MASS LOSS RATES IN RED SUPERGIANTS AND THEIR IMPACT ON THE CIRCUMSTELLAR MEDIUM

2019 ◽  
Vol 55 (2) ◽  
pp. 161-175
Author(s):  
L. Hernández-Cervantes ◽  
B. Pérez-Rendón ◽  
A. Santillán ◽  
G. García-Segura ◽  
C. Rodríguez-Ibarra
Keyword(s):  
Mass Loss ◽  
Stellar Evolution ◽  
Gas Dynamics ◽  
Numerical Experiments ◽  
Evolutionary Models ◽  
Solar Composition ◽  
Red Supergiants ◽  
The Impact ◽  
Circumstellar Medium ◽  
Loss Rates

In this work, we present models of massive stars between 15 and 23 M⊙ , with enhanced mass loss rates during the red supergiant phase. Our aim is to explore the impact of extreme red supergiant mass-loss on stellar evolution and on their circumstellar medium. We computed a set of numerical experiments, on the evolution of single stars with initial masses of 15, 18, 20 and, 23 M⊙ , and solar composition (Z = 0.014), using the numerical stellar code BEC. From these evolutionary models, we obtained time-dependent stellar wind parameters, that were used explicitly as inner boundary conditions in the hydrodynamical code ZEUS-3D, which simulates the gas dynamics in the circumstellar medium (CSM), thus coupling the stellar evolution to the dynamics of the CSM. We found that stars with extreme mass loss in the RSG phase behave as a larger mass stars.

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