Yet, another question on the Risk Margin please.
Which market risks would be non-hedgeable (included in RM) vs. hedgeable (excluded from RM).
Based on Mock C q2 iii B, I am deducing that the spread risk would be one of those hedgeable risks which are not impacting the RM. I just don't have a clear division/ distinction in my mind to quickly sort things out under the exam conditions.....
Part iii c of the solution mentions how the "reinsurer's credit default" would be accounted for in RM.....(credit default would be non-hedgeable?)
Last edited by a moderator: Sep 7, 2017