Nested stochastic modelling approach for liability modelling

We’ve implemented the nested stochastic modelling approach for liability modelling and then extended this approach to forecasting international accounting results based on a 3-factors affine term structure stochastic model for discount rates. We presented these at the Paris International Actuarial Conference (Program), which took place online.

  • AFIR: Threshold portfolio return corresponds to the minimum portfolio return necessary to keep the funding ratio on the same level compared to the last financial year.
    • Our approach based on the nested stochastic modelling (esp. of liabilities) verifies potential limits of this necessary portfolio return over different future periods
    • This approach helps to understand how mutations in the pension fund population as well as client specific scenarios of the HR-policy could impact the liability bandwidth and the development of the funding ratio
    • PDF Presentation
    • Link to presentation (registration is required)
  • PBSS: Our presentation in PBSS-Section uses the nested stochastic approach in relation to forecasting results for international accounting valuations (examples for IAS19).
    • This analysis is more important for CFOs of firms listed in stock exchanges – because they have to evaluate pension fund liabilities based on IAS19 (or US GAAP or IPSAS)
    • It shows the forecast of the most important disclosure key metrics for the next 1-3 years (examples for IAS19) – could be implemented for US GAAP and IPSAS as well
    • PDF Presentation
    • Link to presentation (registration is required)
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