On the hedging of liabilities with an endogenous profit sharing mechanism

Frédéric Sart ()
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Frédéric Sart: Risk Management - Delta Lloyd Life

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Abstract: The fair replication method is a method designed to value liabilities with an endogenous profit sharing mechanism, i.e. based on the book yield of the backing assets. The basic idea is to construct a hypothetical portfolio, the fair replicating portfolio (FRP), whose cash flows are scenario-invariant. The method is a computationally efficient alternative to traditional stochastic modeling. It may be particularly useful in applications where extensive calculations of best estimate of liabilities are required.

Keywords: Best estimate of liabilities; Life insurance; Profit sharing mechanism; Replicating portfolio; Solvency II (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-rmg
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Published in Bulletin Français d'Actuariat, 2016, 16 (31), pp.139-155

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01574949

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