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Research

We are involved in research projects due to our special interest in the modeling and valuation of financial risks.  Our most significant research projects are highlighted below.

RSM (Representative Scenarios Method)

Stephen Strommen proposed the Representative Scenarios Method as a possible principle-based reserving approach for fixed annuities.  This was done in the context of considering whether VM-20 should be adapted and extended to fixed annuities, or whether another method might have advantages.

The main advantages seen for RSM are:

  • Replacement of a large number of stochastic scenarios with a small number of specially constructed deterministic scenarios that essentially serve as stress tests.
  • Use of a scenario-based method for all risks, not just investment returns.
  • Use of an aggregate margin rather than the sum of separate assumption-specific margins.

Research into RSM has resulted in several documents that can be downloaded here.  Some cover the theoretical development of RSM, and some cover field tests of RSM.

 

Current projects

Blufftop LLC is currently involved in the following research:

  • A Society of Actuaries research project on simplified methods for VM-20 (in partnership with other researchers).
  • Alternative software designs for asset-liability simulation modeling for financial institutions.  This research focuses on two fundamentally different algorithms and the use of multiple processors to reduce runtime.