Use of asset volatility in unit linked BEL calculations

Hi Lindsay,

Liability valuation: risk-neutral vs. real-world
I would like to ask about the difference between a risk-neutral liability valuation and a real-world liability valuation. I understand that in a risk-neutral valuation, the best-estimate liability cash flows would be discounted using a risk free yield curve with different risk-neutral volatilities in each simulation. In a real-world liability valuation, how would the best-estimate liability cash flows be discounted, is it discounted by the expected real-world investment returns of the assets backing the liabilities?

SCR
I understand that Solvency II uses risk-neutral calibration to calculate prescribed SCR formula. So does it work like this, we would find the 99.5% one-year VaR based on:
- Assets projected using risk-free rates with risk-neutral volatilities
- Liabilities discounted with risk-free rates and risk-neutral volatilities
So if we want to find a real-world SCR (eg. in an Economic Capital model), we would just change the assets to be projected and liabilities discounted at their expected real-world returns and volatilities?

Also, usually we distinguish between risk-neutral and real-world in stochastic models, how about in deterministic models?

Thanks!