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True Asset and Liability
Integration
Projections From Common Economic
Forecasts
- rates of inflation
- interest rates & yield
curves
- rates of return for a wide
range of asset classes: fixed income, equity and alternative
Monte Carlo
Process. Simulation is
used to produce the forecasts. Interrelationships among the variables
are captured using multivariate techniques.
Asset Class Returns Linked To
Inflation & Interest Rate Forecasts. Inflation
forecasts are composed of expectations of future inflation plus
surprises. Returns on fixed income securities are derived from
simulations of the treasury yield curve. The yield curve projections are
based on estimates of future expected interest rates. The yield curve
that results is consistent with the "expectations" hypothesis of the
term structure, with the addition of liquidity premiums at the user's
option. Returns on other investments are derived from inflation rate and
government bond return projections.
Fully Stochastic Liabilities
Using the same simulated economic
environment the software projects the experience of the plan's
liabilities, benefit improvements and changes in actuarial assumptions.
The changes are selected by the user and apply on a year-by-year basis
and are.
- Experience: Gain & loss for
both economic assumptions and decrements.
- Benefit Improvements:
Colas, changes in dollar denominated benefit levels.
- Actuarial Assumptions:
Dynamic changes in valuation rates, general pay increases.
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