Year: 2011
Type: dissertation
Abstract: Research in the area of stochastic models for actuarial use in South Africa is limited to \nrelatively few publications. Until recently, there has been little focus on actuarial \nstochastic models that describe the empirical stochastic behaviour of South African \nfinancial and economic variables. A notable exception is Thomson’s (1996) proposed \nmethodology and model. This thesis presents a collection of five papers that were \npresented at conferences or submitted for peer review in the South African Actuarial \nJournal between 1996 and 2006. References to subsequent publications in the field are \nalso provided. Such research has implications for medium and long-term financial \nsimulations, capital adequacy, resilience reserving and asset allocation benchmarks as \nwell as for the immunization of short-term interest rate risk, for investment policy \ndetermination and the general quantification and management of risk pertaining to those \nassets and liabilities. \nThis thesis reviews Thomson’s model and methodology from both a statistical and \neconomic perspective, and identifies various problems and limitations in that approach. \nNew stochastic models for actuarial use in South Africa are proposed that improve the \nasset and liability modelling process and risk quantification. In particular, a new Multiple \nMarkov-Switching (MMS) model framework is presented for modelling South African \nassets and liabilities, together with an optimal immunization framework for nominal \nliability cash flows. The MMS model is a descriptive model with structural features and \nparameter estimates based on historical data. However, it also incorporates theoretical \naspects in its design, thereby providing a balance between purely theoretical models and those based only on empirical considerations.
Author: Alexander James Maitland
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2098810777