Chapter 33 - Valuation Of Liabilities Flashcards
Valuation methods
Table 🙃
Valuing options and guarantees
Not always appropriate to assume highest cost
Risk of anti selection
Stochastic approach
Valuing options and guarantees
Take into consideration
State of the economy
Demographic factors
Cultural bias
Customer sophistication
Sensitivity analysis
Extent of margins needed in assumptions
Extent of global provisions required
Allowing for risk
Discounted cashflow valuation
Margin into each assumption
Overall contingency loading
Adjust discount rate
Allowing for risk
Fair valuation
No need to adjust for financial risk
Non financial risk: adjust cashflows, extra provision
Different methods of calculating provisions
Statistical analysis
Case by case estimate
Proportionate approach