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Solvency II

Knowledge Base Articles

Part III: Asset and Liability Management Using LSMC - Allocation Optimisation

In the third and concluding article in the ALM using LMSC series, we focus on analyzing the optimal asset allocations in the context of changing asset classes as well as finding the optimal allocation by maximizing the risk-adjusted net asset value. The estimates based on the LSMC method are then compared to the estimates obtained from the full nested Monte Carlo method.

Part I: Asset and Liability Management Using LSMC - Introduction to the Framework

In the first part of the ”Asset and Liability Management using LSMC” article series, we outline an ALM framework based on a replicating portfolio approach along with a suitable financial objective. This ALM framework, albeit simplified, is constructed to provide a straightforward replication of the complex interactions between assets and liabilities. Moreover, a brief introduction to the LSMC method used to generate all underlying risk factors is presented.

Introduction to Credit Index Modelling

This article will discuss why it is important to model credit indices and detail a number of different approaches to this problem.

Overcoming the Insufficiency of Historical Data; The Rolling Window Method

In this article, we evaluate the rolling window procedure to alleviate the problem of inadequate data by increasing the number of observations extracted from a limited set of data.

Blog Posts

Mitigating Risk: A Joint Model for High-Yield and Investment-Grade Credit Indices

Today, there are many flawed corporate bond pricing models. However, there is also a novel credit-spread approach that can simulate index prices and accurately capture probability of default, enabling better risk management and regulatory compliance.

11 Important Properties of Asset Returns

When specifying your next risk model for asset returns there are a number of properties, or stylized facts, to keep in mind.

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