Risk Management Solution

Question 0

ALM cash flow matching techniques?

Answer 0

Duration management;

Immunization by equaling duration and positive convexity.

Question 1

Risk characteristics?

Answer 1

Frequency, severity, time frame

Question 2

Elements of designing actuarial solutions?

Answer 2

Meet stakeholders’ needs; communicate and consensus ; optional solutions; quantify the risks; interrelationships between risks; conceptual diagramming; constraints; ask questions; tap into established work; integrate market research ; practical considerations; mathematical model; data available ; modify variables; sensitivity tests; validate assumption ; informed estimates; compliance; documents ; communicate with applicable standards; ensure timely and effective implementation ; maintain flexibility

Question 3

Semi annual coupon bond - 7% coupon - cash flow pattern?

Answer 3

3.5% per 6 month, with principle repaid at maturity ( last pay with coupon)

Question 4

10-year 6% mortgage - cash flow pattern?

Answer 4

Borrow principle , Even installment repaid monthly in the end, at monthly interest 0.5%, 120 installments.
(PMT function in excel)