Evaluation of Investment Performance by Applying Total Return Strategies to Variable Annuity with Guarantee
Date Issued
2008
Date
2008
Author(s)
Liu, Chen-Chi
Abstract
Variable annuity with guarantee should quite suit the common people who plan their retirement under present financial environment and the situation that Taiwan becomes an aging society. Insurance company provides policy holders the lowest retirement safeguard and simultaneously gives the opportunity of the participation in bull market. On the other hand, speaking of the insurance company, this commodity is also a brand-new challenge, because its risk quality was obviously entirely different with the past commodity. Therefore how to establish portfolio management becomes the key.he characteristic of variable annuity with guarantee is keeping the opportunity of participation in bull market, so in the suitable time investors must allocate portfolio in high risky and high rewording asset (generally speaking be stock). However because of guarantee insurer must carefully control downside risk of portfolio. Therefore absolute return strategies quite suit variable annuity with guarantee.The range of the study include standard CPPI, dynamic risk multiplicator CPPI, standard TIPP, dynamic risk multiplicator TIPP, CM and shortfall risk-based strategy and we use S& P 500 TR index, U.S long-term treasury and Libor 1 month USD rate as target assets. First step we use real data to test pure portfolio. Second step we use real data to test portfolio applying to variable annuity. Third step we use simulation data to test portfolio applying to variable annuity. The results as follows：. In the pure portfolio test shortfall risk-based strategy is the best strategy.. In the real data CPPI can’t prevent downside risk because portfolio value is much higher than floor.. Compare to other strategies TIPP is lower risky and lower rewording.. The effect of CPPI and TIPP is significant affected by the start point of investment horizon.. Insurance company should disperse maturity of variable annuity with guarantee.. In the simulation data TIPP is the best strategy.
Subjects
absolute return
portfolio insurance
variable annuity with guarantee
portfolio management
asset allocation
shortfall risk
Type
thesis
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