精算師SOA歷年真題:November2004Course8E
發(fā)布時(shí)間：2014-02-26 共4頁
9. Continued
(c) (4 points) Describe ways to hedge the liabilities of the VA and the practical
considerations associated with each.
(d) (2 points) Explain the factors GAL should consider in deciding whether to hedge
its VA liabilities.
(e) (3 points) The Chief Actuary has called a meeting to discuss first year
performance of the VA product. You suspect she wants to discontinue future
sales.
Outline a response which:
• supports continued sales and
• addresses any product shortcomings.
COURSE 8: Fall 2004 - 12 - GO ON TO NEXT PAGE
Enterprise Risk Management Segment
Afternoon Session
Question 10 pertains to the Case Study.
10. (10 points) As the new CFO of Zoolander, you have been asked to determine whether
the new Enhanced Savings Annuity (ESA) product should be launched as scheduled.
You have met with the product team and other executives involved with the product and
have received the following additional information:
• The product will be sold to middle-income individuals.
• The product involves a complex investment and tax strategy.
• The investment strategy is to target high returns with most of the risk being borne
by the individual.
• The earnings model used by the product development team indicates a high ROE
based on the marketing area’s projected sales volume.
• Pricing was based on estimated expenses using the same projected sales volume
used in the earnings model.
• The product is expected to generate a high daily volume of transactions, which
will be administered using the new Triple P system.
• Marketing materials have been developed and ordered.
• Regulations require detailed quarterly statements to be sent to each participant.
• Due to the complexity of the product there are strict disclosure requirements to
prospective clients and the company must attest annually that the sales force has
been properly trained.
• The tax authority has not issued clarification regarding the tax implications of this
product but is expected to do so in several months.
Based on this information:
(a) (4 points) Identify areas of concern with the ESA product development process to
date, and propose ERM best practices to address these areas of concern.
(b) (4 points) Determine the operational risk exposures to Zoolander associated with
launching the ESA, and categorize as people, process, or technology.
(c) (2 points) Describe the components of an operational risk assessment report that
can be used to evaluate the risks associated with this product.
COURSE 8: Fall 2004 - 13 - GO ON TO NEXT PAGE
Enterprise Risk Management Segment
Afternoon Session
11. (5 points) The multi-line, multi-national insurance company, Titanic Life, recently
established a Risk Management Committee (RMC) upon the recommendation of its
internal auditing team. The CEO of Titanic is chairing the RMC. Following the first two
monthly meetings, he concluded that the meeting agendas and the RMC itself were not
very fruitful, since the major risks were handled well by each respective operational unit.
As the newly hired CRO of Titanic, you have been asked to justify the continuation of the
RMC.
(a) Explain the benefits of a centralized risk management function and the elements
required for its successful implementation.
(b) Identify the types of risk that apply to Titanic Life as a multi-line, multi-national
insurance company which would warrant a centralized risk management function.
12. (5 points) You are a consultant to Zambro, Inc., a BBB-rated oil and gas company. The
company is run by a group of senior managers who participate in an incentive
compensation program that has granted them a significant amount of stock options.
Zambro believes it has valuable information regarding future oil prices and is considering
either a selective hedging strategy based on this information or a full-cover hedging
strategy. As an expert in risk management you have been asked to prepare a report for
senior management on hedging as a risk management tool.
(a) Explain the major costs associated with higher variability of corporate earnings
and cash flow and describe how risk management can reduce each of these costs.
(b) Explain how Zambro’s credit rating and compensation program could each
influence the company’s choice of a hedging strategy.
COURSE 8: Fall 2004 - 14 - GO ON TO NEXT PAGE
Enterprise Risk Management Segment
Afternoon Session
13. (15 points) Exponential Life has recently suffered excessive credit losses in its corporate
bond holdings. Exponential Life has decided that its system of setting credit exposure
limits is inadequate and has assigned you to explore other tools with which to better
manage its credit risk position.
You have extracted the following data from commercial credit risk models:
Year
(t)
Risk-free
Zero Rate
1-Year Forward Credit Spreads,
t Years Forward ( FSt )
Cumulative risk-neutral
EDFs ( ) Qt
1 3.00% 0.90% 2.00%
2 3.00% 1.26% 4.00%
(a) Using the KMV approach, determine the credit spread of a 2-year corporate bond
with a face value of $100 that pays annual coupons of 5%, assuming a 40%
recovery rate. Show your work.
(b) Using the Reduced-Form approach, determine the credit spread of a 2-year
corporate bond with a face value of $100 that pays annual coupons of 5%,
assuming a 40% recovery rate. Show your work.
(c) Contrast the underlying theory and key attributes of the KMV approach and the
Reduced-Form approach to credit risk measurement.
COURSE 8: Fall 2004 - 15 - STOP
Enterprise Risk Management Segment
Afternoon Session
14. (5 points) Your company, the International Financial Consulting Group, has been
retained by Typhoon Bank, a large bank in a developing Asian country. Typhoon Bank
is very concerned about its increased exposure to market risk. Furthermore, the country’s
Central Bank has recently announced plans to introduce the Basle Committee Accord as
its new regulatory framework.
You have been assigned to produce a report for Typhoon Bank that addresses the
following issues:
(a) Recommend the form and content of a market risk policy for Typhoon Bank.
(b) Describe the components of an adequate system of internal controls with respect
to interest rate risk that will be expected of Typhoon Bank under a Basle
management framework.
**END OF EXAMINATION**
AFTERNOON SESSION
