/

Nematrian Reference Library

[this page | back links]

Set out below is information (held by the Nematrian website) on the reference you have selected

Abstract "Many life insurance companies and pension funds have been involved in selling products which offer policyholders an element of protection against long term interest rate risk. Typical products, and product features, that offer protection against long term interest rate risk include conventional annuities, defined benefit pensions and guaranteed annuity options. These products and features typically provide protection at terms for which no interest rate instruments are tradable and the associated long term interest rate risks can be very large. Due to the lack of liquidity in the swap and bond market beyond 30 years, companies (and pension funds) often use fairly simplistic strategies to hedge these risks (such as investing in the longest available government bond). This paper examines some alternative approaches to dealing with long term interest rate risk. Specifically, the paper examines some common approaches that are used to forecast the yield curve beyond 30 years. The hedging implications of the various forecasting approaches are considered, and the performance of each approach is assessed in light of historical evidence."

See here to choose a new Category/Sub-Category or here for a list of all references held by the Nematrian website. Please contact us if any of the above material is inaccurate or if there are references you think should be included that we have excluded or vice-versa.

---