ASSET LIABILITY MODELS Flashcards
1
Q
Why are derivatives important for A-L matching?
A
Derivatives do the following:
- increase the available capital or profit
- reduce tax or investment costs
- effectively or efficiently acquire or dispose of positions in relation to assets
- hedge one or more aspects of the guarantees provided in with-profits contracts
- provide the exposure required to match the investment guarantees underlying some contracts, such as guaranteed equity bonds or variable annuities.
