Miscellaneous queries

[Mahima Singla]

Hi Team,
I have following doubts. I understand the concept in core reading but gets confused. So if possible, please help me with an example for following:

1. In Ch 28, it is mentioned at some places that "Equities provides real returns". I understand the diff between real and nominal returns. That real returns do take account of inflation. So when we say that Equities provides real returns does it mean that it provides returns more than inflation ? Please correct me if I am wrong and help with an example.

2. What is dynamic Solvency testing? Please elaborate with an example and how it works?
3. What is fundamental concept of Consistency?

 

[Mark Willder]

Hi Team,
I have following doubts. I understand the concept in core reading but gets confused. So if possible, please help me with an example for following:

1. In Ch 28, it is mentioned at some places that "Equities provides real returns". I understand the diff between real and nominal returns. That real returns do take account of inflation. So when we say that Equities provides real returns does it mean that it provides returns more than inflation ? Please correct me if I am wrong and help with an example.

2. What is dynamic Solvency testing? Please elaborate with an example and how it works?
3. What is fundamental concept of Consistency?

Hi Mahima

1. Yes, over the long term equities tend to provide a higher return than inflation. The return on equities tends to be higher when inflation is high.

2. Dynamic solvency testing is covered in Chapter 15 Section 3.2.

3. The concept of consistency is used in various places. In what context were you looking at consistency here?

Best wishes

Mark