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#61
10-04-2007, 08:55 AM
 hamstrman Member SOA Join Date: May 2006 Location: Brooklyn, NY Studying for CSP - APMV Favorite beer: The kind that isn't beer. You know that kind... Posts: 596

Quote:
 Originally Posted by hw0799 I feel the simulated value is more like St/St-1 instead of the LN (St/St-1), otherwise, the some monthly return are really too high..... Plus, at month 24, the hedge ratio should be 1, isn't it? Thanks.
I agree. This is what I did. And what everyone else did as well. The values are St/St-1.
#62
10-04-2007, 06:43 PM
 sweetie Member Join Date: Jan 2005 Posts: 210

Quote:
 Originally Posted by hw0799 at month 24, in theory the hedge ration is -1, dose it imply that stock position is 0, and bond position 1000, which give a hedge value of 1000? if not, any advice to realize that -1 hedge ratio? thanks.

You must have a different exercise than I did. The one I have only asks us to calc the hedging error. There's no need to calc the hedge ratio.
#63
10-05-2007, 11:27 AM
 sweetie Member Join Date: Jan 2005 Posts: 210

Quote:
 Originally Posted by hw0799 hedge ratio is just N(d1). you have to calculate d1 anyway. for the hedge cost at month 24, should it equal to garantee amount? how to deal with the hedge error at month 24? any suggestions? thanks.
Remember, here's the advice for the candidates:

"While you should address all the issues raised in this assignment, you should not add extraneous information just to demonstrate your knowledge of the module content; it is not possible, nor is it desirable, to work every fact or concept from the module into this exercise."

Yes, the hedge cost at month 24 is the GMMB. The formula for hedge error is the same for all months.
#64
10-10-2007, 09:15 AM
 hamstrman Member SOA Join Date: May 2006 Location: Brooklyn, NY Studying for CSP - APMV Favorite beer: The kind that isn't beer. You know that kind... Posts: 596

Quote:
 Originally Posted by hw0799 I have the same question. but I did not find that the task description said that the current used model LN is the conservative model.
RSLN is more conservative. You're saying how the assignment never said LN was more conservative, and didn't ask you to show that LN was more conservative. You make the assumption that LN must be more conservative because it's being used... why are you making this assumption? Everything is contrary to it. They used the less conservative model. So?
#65
10-17-2007, 01:39 PM
 bevowolf Join Date: May 2002 Posts: 26

Quote:
 Originally Posted by hw0799 anybody the same as me? PM me . thanks. For LN Model: mean: -0.989476175 std: 14.71408399 CTE: 90%: 27.94200153 80%: 20.1096419 For RSLN model: mean: 2.394881616 std: 25.40792861 CTE: 90%:58.9183332 80%: 43.72555389

I got very close to your numbers on the RSLN model but not on the LN. What was your NPV for the first run under the LN, mine was -14.034?
#66
10-17-2007, 07:28 PM
 hw0799 Member Join Date: May 2006 Location: La La land Studying for : Have Fun! Posts: 155

my first LN model is:
-14.0032

here is my number:

LN:
mean:-2.420105652
std: 16.56172628

RSLN:
mean:2.280156333
std: 26.73366447

CTE:
LN:
90%:29.01960428
80%:20.46777

RSLN:
90%: 64.58074284
80%: 46.34432878

Quote:
 Originally Posted by bevowolf I got very close to your numbers on the RSLN model but not on the LN. What was your NPV for the first run under the LN, mine was -14.034?

Last edited by hw0799; 11-20-2007 at 06:56 PM.. Reason: i figured it out.
#67
10-18-2007, 08:45 AM
 bevowolf Join Date: May 2002 Posts: 26

Quote:
 Originally Posted by hw0799 there are some error in my calculation, i correct some, my first LN model is: -14.0032 here is my new number after correct my error: LN: mean:-2.420105652 std: 16.56172628 RSLN: mean:2.280156333 std: 26.73366447 CTE: LN: 90%:29.01960428 80%:20.46777 RSLN: 90%: 64.58074284 80%: 46.34432878

Thanks for the reply, our numbers are very close on both mean and std (rounding error).

But I am not sure how you got your CTEs? I sorted the results of my 50 runs in ascending order and for the 80% CTE I looked at the 45 run and got 13.38 (LN) and 45.57 (RSLN). I used the 45 run since it is in the 90th% and then adjust for two tails liked they talked about on page 160 of the Investment Guarantees book. Did I miss the mark here?
#68
10-18-2007, 09:02 AM
 Inigo Montoya Member SOA AAA Join Date: Nov 2002 Studying for NOTHING! Favorite beer: Yuengling Posts: 346

I'm very close to hw0799's numbers as well. How did you calculate your discount factor? Did you use e^-rt or (1+i)^-t?

For CTE, check out page 165 of the Investment Guarantees book.
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Hello, my name is Inigo Montoya. You killed my father: prepare to die.

#69
10-18-2007, 09:03 AM
 bevowolf Join Date: May 2002 Posts: 26

I think I got it, take the average of the top 10 results. Agree.
#70
10-18-2007, 09:13 AM
 Inigo Montoya Member SOA AAA Join Date: Nov 2002 Studying for NOTHING! Favorite beer: Yuengling Posts: 346

Agreed.
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Hello, my name is Inigo Montoya. You killed my father: prepare to die.

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