April 2016 Q3 vs Sep 2014 Q2

Discussion in 'SP2' started by dimitris13, Jan 28, 2019.

  1. dimitris13

    dimitris13 Member

    Hi,

    i am studying the above two questions that are related with UL and their gtees.

    April 16 Q3 refers to a market consistent liability and in the stochastic simulation the solution makes reference to:
    1. risk- free returns and
    2. investment return volatilities that reflect the actual assetss inthe unit funds

    so far so good.

    on the other hand Sep 14 Q2 mentions:
    1. project unit funds realistically.
    are these two equivalent or the realistically refers to sth else (eg real world) and if so why ?

    Thanks
    D
     
  2. dimitris13

    dimitris13 Member

    anyone?
     
  3. mugono

    mugono Ton up Member

    Hi

    In short, the two approaches look to be different. The 2014 question appears to be open and I suspect any reasonable approach (eg based on market consistent principles or a more traditional / actuarial approach based on a realistic projection) would’ve been acceptable.

    The 2016 question, which coincidentally would’ve been set post the introduction of S2 (a market consistent regime) specifically asked for a market consistent approach.

    Hope that helps
     

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