Description: For most of the last forty years, corporate defined benefit pension plan assets have been managed to balance risk versus reward in more or less the same way that a risk averse individual would do with his own portfolio. Recently liability cognizant strategies have been developed, but these also attempt to balance risks and rewards. But pension plans are not individuals; they, much like their widely-held corporate sponsors, are pass-through institutions. The economics of such entities are found in the corporate finance literature rather than in the literature of portfolio choice. The corporate finance (and thus the pension finance) objective is economic value added rather than return for risk. Enterprise risk management is a corporate finance activity too and its goal should also be value added rather than return for risk. The intersection of enterprise risk management and pension finance leads to a value-based discipline with two startling results: • Widely-held corporations can increase shareholder value by hedging away their own systematic risk (e.g., CAPM β). • Very many corporate defined benefit pension plans should define their liabilities and manage their assets to develop a net short equity exposure (negative β).

Description: In this session, panelists will lift the curtain on the main features of investment grade (IG) private placement bonds and below investment grade (BIG) private debt and compare them with available public bond and bank loan alternatives. The panel will examine the motivations for insurance companies and pension funds to invest in private debt and the legal, diligence and operational requirements to maintain a private debt portfolio. We will also conduct a 2017 private placement market review and look forward to 2018’s likely new USD and non-USD issuance and which industry sectors are likely to issue. This session will also cover their risk and reward characteristics, and the structural intricacies of the various IG and BIG debt types and whether there is sufficient compensation for illiquidity and other risks.

Description: Recent reports have expressed concern over historically high levels of corporate indebtedness, with an increasing share of investment-grade debt now in the BBB category, just above speculative-grade. This session will explore trends in the corporate debt market, with a focus on the risks and opportunities for portfolios in the current environment.

Description: Summarizes a research paper considering insurer performance during the financial crisis, with actions and circumstances that improved results highlighted.

Description: Feature article describing how traditional pension asset allocations contain so much risk that the details of the “liability benchmark” have been largely ignored.

Description: In this comprehensive exploration led by Eric Milner, viewers are immersed in the intricate realm of actuarial science and quantitative finance. The video navigates through interest rate modeling, yield curves, and financial derivatives, shedding light on their practical significance in global financial operations. Key concepts such as Cox-Ingrersoll-Ross and Hull-White models are elucidated, alongside standard yield curve models and advanced quantitative tools like the Black-Scholes model and Monte Carlo Simulations. Actuaries gain indispensable insights into managing complex financial risks, fostering stability, and resilience against market fluctuations, crucial for strategic decision-making and investment planning and risk management across various sectors. Contributors: Eric Milner, ASA, MAAA; Richard Vaccaro, FSA, MAAA ; Diyi Zhao ASA, MAAA; Jon Forster ASA, MAAA

Description: A research report providing a primer on the mechanics and uses of the Hidden Markov Model for actuarial and financial applications.

Description: Interest rates steadily declining ever since the Volcker Fed tackled inflation in the early eighties. Ten years of stimulating monetary policy brought new lows. We should have braced ourselves for a return to neutrality, but that concept remains elusive. We will explore structural issues that have brought rates to these low levels and the potential impacts on the insurance business.

Description: Insurance companies utilize derivatives in a variety of ways to manage and mitigate risks that are inherent in their investment or liability portfolios. They can be characterized by three main features: medium long-term duration; large volumes; and significant market risk exposure. Given the persistent low interest rate environment across the curve since the 2008 financial crisis, large companies need to hedge their liabilities, as illustrated by the significant recent increase from $786 billion as of fiscal year 2010 to $1,885 billion as of FY 2014 by insurance companies.As the Variable Annuities (VA) guarantees embedded within those liabilities hold a strong convex risk profile with respect to the underlying stock, VA carriers need to buy some convex hedge assets such as options to match the liability risk profile to improve hedge effectiveness, implying the growing cost of hedging. Such market impact of the quantity on the cost of hedging is further magnified in the recent period with the short-lived, but sharp transitions from low volatility to high volatility, when market volatility suddenly increases, even when there were no well-known fundamental catalysts. This partially stems from the growing managed volatility funds embedded within VA ($bn 400).VA carriers willing to trade a large quantity of options will see such market impact as an important dilemma, as the cost of placing one large order to close position will be far greater than the sum of infinitely small orders differed in time. In that context, managing market impact requires introducing an explicit market impact function, the influence of which the agent will try to minimize. The effect on hedge asset prices significantly depends on whether there is or not significant delta hedging activity. In case of no significant delta hedging activity, the risk appetite has a significant influence on the optimal execution strategy. If there is significant delta hedging activity, the optimal trading involve

Description: The author notes that equity investment management is often classified into a number of different styles, the simplest being growth and value. In discussing both approaches the author also brings in the concept of momentum and concludes that momentum should be an additional parameter reviewed in the investment decision.