May 2013

Yield curve extrapolation: work in progress 

A highly accessible overview of the current state of play in the technically challenging and increasingly contentious topic of yield curve extrapolation.

Solvency II was not so long ago hailed as the emerging ‘gold standard’ for setting life insurance firms’ regulatory capital, but now bears a closer resemblance to a slow motion train wreck.In this note I highlight the five sources of trouble that have de-railed the project and speculate on what – if anything – might be done to avoid the same errors elsewhere where capital regulation is still under development.

1995 

to 2012

Over a 16-year period I have written a large number of blogs, technical notes and research reports for Barrie & Hibbert’s research library covering topics such as:

• Portfolio risk measurement & management
• Asset and liability valuation and management
• Analysis of the pricing and risks of various savings and structured products
• Stochastic asset models and their calibration
• Yield curve extrapolation and the analysis of liquidity premia in financial asset prices.

For example, the widely-quoted 2001 research report co-authored with Philip Mowbray and Craig Turnbull: A Stochastic Asset Model & Calibration for Long-Term Financial Planning Purposes

A regular presenter at industry conferences including UK Actuaries Pensions conference, June 2011: "Pensions schemes: Are there lessons to be learned from insurers?"

2012

The Interaction of Investment Risk and Underwriting in Property/Casualty Insurance, Contingencies, July 2012

2010

Understanding the Failure of Diversification, Contingencies, November 2010

2009

Life & Pensions, June 2009. ‘A framework for the extrapolation of long-term interest rates’ with David Antonio, Stephen Carlin, Colin Holmes, Zhuoshi Liu, David Roseburgh and Steffen Sorensen.

2009

11^th Global Conference of Actuaries, Mumbai, February 2009, ‘Why is equity diversification absent during equity market stress events? Understanding and modelling equity tail dependence’

2006

Fair Value and Pension Fund Management edited by Niels Kortleve, Theo Nijman, and Eduard Ponds, Elsevier Science, July 2006, ISBN 0-444-52245-X, 218 pages.  Chapter 5. Techniques for market-consistent valuation of contingent claims (with Steven Morrison and Craig Turnbull).

2003

British Actuarial Journal, Volume 9, Number 4, 2003, pp. 725-777(53) ‘Measuring and managing the economic risks and costs of with-profits business’ with Craig Turnbull. The paper was highly commended and presented to the Faculty of Actuaries on 17 February 2002 and to the Institute of Actuaries on 2 June 2003.

2002

Pensions, Vol. 8, No. 1, pp. 41–62. ‘Understanding Investment Policy Choices for Individual Pension Plans’ with Philip Mowbray.