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Actuaries and Derivatives

Published online by Cambridge University Press:  10 June 2011

M.H.D. Kemp
M.H.D. Kemp
Affiliation:
Scudder Threadneedle Investments, 60 St. Mary Axe, London, EC3A 8JQ, U.K. Tel: +44 (0)20 7464 5000; Fax: +44 (0)20 7464 5466
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Abstract

This paper draws analogies between techniques used to reserve for, control and manage derivatives and techniques used by actuaries in other fields. It concentrates on equity derivatives. It also includes a review of the factors which significantly influence the appropriate size of reserves to hold for a derivatives portfolio. These include the likelihood of market jumps, uncertainty in future market volatility and the size of transaction costs, as well as on more obvious factors like position risk.

Keywords

DerivativesReserving for DerivativesHedgingPrinciple of No ArbitrageRisk-Neutral Probability Law
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 3 , Issue 1 , 01 April 1997 , pp. 51 - 180
Copyright
Copyright © Institute and Faculty of Actuaries 1997

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