Accounting for Intervention Options: A Note on the Free Policy Reserve

BACK
Mogens Steffensen, Danemark
Download

Summary:
The free policy reserve plays an important role in accounting for intervention options. We derive the dynamics of the statewise free policy reserve in the case of a constant interest rate. These dynamics have a simple interpretation. Hereby it is possible to write forward the free policy reserve and explain the changes in accounting and policy holder communications. We also introduce the notion of free policy surplus as the excess of assets over the free policy reserve. Finally, we indicate how the results generalize to dynamic interest rates.
 
Date: 29 May - Time: 16:30 to 18:00 - Room: 252A
Theme: 9.A. Various topics