A
Actoid
Member
Hi
In the Surrender Values chapter of the ActEd notes (Ch. 22, p. 19), the notes give 5 situations for regular premium without-profits endowments. Situation 1 states that the matched asset share drops a lot should interest rates rise suddenly. Two questions: why "matched" - i.e. does this refer to the same direction of movement?, and why would the asset share drop "a lot"?
I reread the Asset Share theory and understood all the components of the asset share to be "locked" by experience, i.e. current experience can't change the past experience assumed by the asset share calc. The only component could be the unrealised capital gains in the investment income. Should you have fixed interest backing assets / reserves, the capital gains figure will drop by the MTM adjustment. Is this component enough to cause the asset share to drop by "a lot" - surely this will also depend on the duration of the contract?
What am I missing?
Thanks.
In the Surrender Values chapter of the ActEd notes (Ch. 22, p. 19), the notes give 5 situations for regular premium without-profits endowments. Situation 1 states that the matched asset share drops a lot should interest rates rise suddenly. Two questions: why "matched" - i.e. does this refer to the same direction of movement?, and why would the asset share drop "a lot"?
I reread the Asset Share theory and understood all the components of the asset share to be "locked" by experience, i.e. current experience can't change the past experience assumed by the asset share calc. The only component could be the unrealised capital gains in the investment income. Should you have fixed interest backing assets / reserves, the capital gains figure will drop by the MTM adjustment. Is this component enough to cause the asset share to drop by "a lot" - surely this will also depend on the duration of the contract?
What am I missing?
Thanks.