Mean-Field Libor Market Model and Valuation of Long Term Guarantees

Florian Gach (), Simon Hochgerner (), Eva Kienbacher () and Gabriel Schachinger ()
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Florian Gach: Austrian Financial Market Authority (FMA)
Simon Hochgerner: Austrian Financial Market Authority (FMA)
Eva Kienbacher: Oberösterreichische Versicherung AG
Gabriel Schachinger: Austrian Financial Market Authority (FMA)

Methodology and Computing in Applied Probability, 2025, vol. 27, issue 2, 1-43

Abstract: Abstract Existence and uniqueness of solutions to the multi-dimensional mean-field Libor market model (introduced by Desmettre et al., Int J Theor Appl Finance 25(01):2250005, 2022) is shown. This is used as the basis for a numerical asset-liability management (ALM) model capable of calculating future discretionary benefits in accordance with Solvency II regulation. This ALM model is complimented with aggregated life insurance data to perform a realistic numerical study. This yields numerical evidence for heuristic assumptions which allow to derive estimators of lower and upper bounds for future discretionary benefits. These estimators are applied to publicly available life insurance data.

Keywords: Solvency II; Future discretionary benefits; Asset liability management; Market consistent valuation; Libor market model; 91G30; 91G50 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11009-025-10146-w

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