Liquidity Risk - Its Relevance to Actuaries

This presentation explores liquidity risk. It covers topics such as what liquidity risk is, what are its characteristics, why is it important (to both non-actuaries and actuaries) and liability liquidity risk (including material on annuity books and pooled vehicles). An appendix explores VaR versus TVaR mindsets. The presentation draws on material in the author’s books on ‘Market Consistency’ and ‘Extreme Events’.

1Liquidity Risk and its relevance to actuaries
2Liquidity Risk and its relevance to actuaries
3Liquidity Risk and its relevance to actuaries
4Liquidity Risk
5Even by late 2007 recognised as an issue
6As were possible contagion effects
7Hedge funds (and other active management styles) potentially particularly exposed to such risks
9Impact that leverage can have on portfolio behaviour
10New liquidity standards
11Liquidity risk and actuaries
12Liquidity risk and its relevance to actuaries
13Liability liquidity risk
14Not just of academic interest in stressed markets
15Financial impact can be very substantial
16Exactly what is liquidity? (1)
17Exactly what is liquidity? (2)
18Exactly what is liquidity? (3)
19Exactly what is liquidity? (4)
20Modelling liquidity premia on different instruments
21Working out the 'base' risk free rate for such analyses can also be challenging in stressed conditions
22Risk of sovereign default
23Liquidity of pooled funds (including unit-linked funds)
25Liquidity risk and its relevance to actuaries
26Appendix: VaR versus TVaR mindsets
27VaR versus TVaR
28Mathematical definitions
29VaR versus TVaR (1)
30What are the underlying mindsets
31VaR versus TVaR (2)
32Shareholder vs. Policyholder vs. Regulator Perspectives (1)
33Shareholder vs. Policyholder vs. Regulator Perspectives (2)
34Treatment of illiquidity (1)
35Treatment of illiquidity (2)
36Treatment of illiquidity (3)
37Stress testing methodologies
39Important Information

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