Ch 13-Offer prices

[Actuary@22]

Hi
Under section 4 of Appropriation prices,the reading states that the term Offer basis means underlying assets being bought are being purchased at their Offer price.
Whereas in Section 6 Offer and bid prices, its written that offer price is price at which units are Offered for sale to policyholder.
I am getting confused btw what offer price actually means.Pls explain.

 

[Mark Willder]

Hi
Under section 4 of Appropriation prices,the reading states that the term Offer basis means underlying assets being bought are being purchased at their Offer price.
Whereas in Section 6 Offer and bid prices, its written that offer price is price at which units are Offered for sale to policyholder.
I am getting confused btw what offer price actually means.Pls explain.

Hi

There are two different offer prices: one for the assets and one for the units.

So in section 4 we are talking about buying assets. The stock exchange will quote two prices: an offer price for buyers and a lower bid price for sellers. If the insurer is buying assets (due to an expanding fund) it will need to pay this higher offer price.

Section 6 is talking about policyholders buying units. Insurers often quote two prices: the offer price for policyholders to buy units and a bid price for them to sell.

There is a third use of the word "offer". The offer basis refers to an insurer that is expanding and so unit prices are based on the appropriation price.

So it is important to distinguish between offer basis, offer price of assets, and offer price of units.

Best wishes

Mark