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Stochastic simulation in life office solvency assessment

Published online by Cambridge University Press:  20 April 2012

M. R. Hardy
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Abstract

In this paper an asset/liability model is used to compare the quality of information available from a set of stochastic simulations with a traditional deterministic sensitivity test approach.

The traditional approach applied to a range of variants of the basic model office fails to distinguish adequately very risky strategies from relatively secure strategies. The stochastic simulation method succeeds in ranking the various strategies considered into an intuitively satisfactory order of insolvency risk, as well as giving quantitative information on the relative probabilities of insolvency of different strategies and on the timing of potential solvency problems.

Keywords

Life OfficeSolvencyWilkie Model
Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 120 , Issue 1 , 1993 , pp. 131 - 151
Copyright
Copyright © Institute and Faculty of Actuaries 1993

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References

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