Asset Models

It simply is not plausible to argue that there is a single model that can meet the requirements of the risk analyst across all possible problems. Rather the analyst should aim to build a library of models that enable him to tackle the different types of problem that he\she is faced with.[1] https://www.actuaries.org.uk/system/files/documents/pdf/hibbert0.pdf

 

Valuation of assets
Assets are required to be valued at market value, based on readily available market prices in orderly transactions that are sourced independently (i.e. quoted market prices in active markets). If such prices are not available then mark-to-model techniques can be used — provided these are consistent with the overall market consistent (or “fair value” or “economicvalue”) approach, i.e. the amount at which the assets could be exc hanged between knowledgeable willing parties in an arm’s length transaction

[2] https://www.actuaries.org.uk/system/files/field/document/IandF_SA2_SolvencyII_2016.pdf  

 

 

 

Barrie and Hibbert Model  -  a stochastic asset model that can be used for long-term financial projections

 

 

 

 

The following are relevant:

  • equity returns,
  • dividend yields,
  • inflation  when we discount cashflows should we allow for inflation ?
  • real and nominal term structures

 

 

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A STOCHASTIC ASSET MODEL & CALIBRATION FOR LONG-TERM FINANCIAL PLANNING PURPOSES

John Hibbert, Philip Mowbray & Craig Turnbull
June 2001

References

References
1 https://www.actuaries.org.uk/system/files/documents/pdf/hibbert0.pdf
2 https://www.actuaries.org.uk/system/files/field/document/IandF_SA2_SolvencyII_2016.pdf