Papers and reports

The authors discuss the investment of pension and other institutional funds, stressing a theme of investing to meet liabilities. Their aim is to stimulate debate by actuaries and the investment community, leading to the development of sounder and more robust approaches to pension fund investment and its monitoring. The first part of the paper considers the matching of assets to liabilities, concentrating a major principle applicable to actuarial valuations where assets and liabilities are mismatched.

This paper discusses two important models of option pricing: the binomial model and the Black-Scholes model. It begins with a brief description of options.

The traditional approach in the United Kingdom to the analysis of permanent health insurance (PHI) data and to the rating of PHI business has been the Manchester Unity approach. This approach, which has its origins in Friendly Society business, is in some ways unsuitable for modern PHI business. (An interesting discussion on this subject can be found in Report No.

In an earlier paper the control characteristics of the aggregate method of funding were displayed by way of its response to a spike, step and random variation in the earned rate of interest, together with a simple intuitive method of setting the valuation rate of interest. The projected unit method is analysed here in the same way. A further algorithm is developed which aims at driving an opening fund and contribution rate to a desired fund and contribution rate in n years, using the smoothest path of contribution rates.

The distribution of insurance claims in a given time period is usually regarded as a random sum. This paper sets up a time series model for the value of the claims and combines it with a model for the number of claims. Thus past observations can be used to make predictions of the future values of the random sum, and the overall model ensures that they are discounted appropriately. It is shown that explanatory variables can be introduced into the model, and how it can be extended to handle several groups.

The computer language APL is not as well known in the financial field as it might be and yet its structure and syntax make it very well suited to financial and actuarial calculations (as well as to mathematical and statistical calculations)—indeed it might almost be called a natural language for financial calculations.

This paper describes the Corporate Planning system which has been developed in the author’s office over the last 6 years or more. It first makes a high level pass through the various components and how they fit together and then looks in more detail at some of the components.

The basic task of actuarial valuation is to compare the quantity of assets with the quantity of liabilities. A refinement is to compare qualities as well as quantities. The qualities of assets and liabilities are their characteristics of cash flow, duration, growth, price volatility, etc. This note considers a conceptual and mathematical framework for matching in the most general terms. Insurance work in the United Kingdom uses the notion of reserves for mismatching.