Market risk CPD resources for enterprise risk management
The FSA defines market risk as "the risk that as a result of market movements, a firm may be exposed to fluctuations in the value of its assets, the amount of its liabilities, or the income from its assets. Sources of general market risk include movements in interest rates, equities, exchange rates and real estate prices."
The Actuarial Profession has produced a large number of papers on market risk and its management in insurance and pension funds, and we can only highlight a small sample of these.
General
- Modelling extreme market events [pdf]. A report of the benchmarking stochastic models working party, 2008.
- The credit crunch - causes, consequences and cures [pdf]. Presentation by Roger Bootle to the 2008 life convention.
Derivatives
Those wishing to develop deeper knowledge about the application of derivatives should consider studying Subject ST6 (Finance and investment. Specialist technical B).
Other recommended sources are:
- Options, futures and other derivatives, by John C Hull. 7th ed. Prentice Hall, 2008.
- Credit derivatives [pdf]. Derivatives working party report (2006).
- The use of derivatives in reducing risk in pension scheme investment SIAS paper, Apr 2006.
Market risk sources of data
- Gilt indices and historic data
- IPD commercial property data
- Inflation rate resources
- Nationwide residential property data While not a major issue for life insurers, this does affect the cost of "no negative equity" guarantees for equity release business.
- Market CDS and other credit market data
- Swap rates
- Sauder School of Business Exchange Rate Service. Extensive history of foreign currency exchange rates
- VIX implied option volatility data
- Towers Watson investment statistics Page covering a wide range of market variables.
If you have any interesting papers or sites on market risk which you feel should be included here, please send them to Dawn McIntosh, the manager for the ERM practice executive committee (dawn.mcintosh@actuaries.org.uk).