The Risk Management of Minimum Return Guarantees

Mahayni, AB; Schlogl, E

The Risk Management of Minimum Return Guarantees

Mahayni, AB Schlogl, E

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Publisher:: German Academic Association of Business Research
Publication Type:: Journal Article
Citation:: BuR - Business Research, 2008, 1 (1), pp. 55 - 76
Issue Date:: 2008-01

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Field	Value	Language
dc.contributor.author	Mahayni, AB	en_US
dc.contributor.author	Schlogl, E https://orcid.org/0000-0001-8898-6879	en_US
dc.date.issued	2008-01	en_US
dc.identifier.citation	BuR - Business Research, 2008, 1 (1), pp. 55 - 76	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10032
dc.description.abstract	Contracts paying a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified relative to a benchmark portfolio, are closely related to unit-linked life-insurance products and can be considered as alternatives to direct investment in the underlying benchmark. They contain an embedded power option, and the key issue is the tractable and realistic hedging of this option, in order to rigorously justify valuation by arbitrage arguments and prevent the guarantees from becoming uncontrollable liabilities to the issuer. We show how to determine the contract parameters conservatively and implement robust risk-management strategies.	en_US
dc.publisher	German Academic Association of Business Research	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP0559879
dc.relation.ispartof	BuR - Business Research	en_US
dc.relation.isbasedon	10.1111/ajfs.12035	en_US
dc.title	The Risk Management of Minimum Return Guarantees	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.for	140207 Financial Economics	en_US
utslib.for	150205 Investment and Risk Management	en_US
utslib.for	150201 Finance	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.consider-herdc	true	en_US
pubs.issue	1	en_US
pubs.volume	1	en_US

Abstract:

Contracts paying a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified relative to a benchmark portfolio, are closely related to unit-linked life-insurance products and can be considered as alternatives to direct investment in the underlying benchmark. They contain an embedded power option, and the key issue is the tractable and realistic hedging of this option, in order to rigorously justify valuation by arbitrage arguments and prevent the guarantees from becoming uncontrollable liabilities to the issuer. We show how to determine the contract parameters conservatively and implement robust risk-management strategies.

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http://hdl.handle.net/10453/10032