B&H Hedge
Recent times have clearly represented a challenging period for the global economy and the financial services sector in particular. The insurance sector has not been immune from such malaise. In particular the volatile financial market environment has exposed the limitations of some companies’ strategies for managing the market risk exposures created by the provision of significant long-term guarantees in VA products.
Economic Scenario Modelling for Variable Annuity Hedging
Based on Barrie & Hibbert’s world-leading core insurance ESG product, and extended to meet the specialist demands of complex VA hedging applications, B&H Hedge represents a global best-of-breed software service solution for hedging groups that wish to maintain leading-edge internal modelling capabilities.
B&H Hedge is an ESG modelling and calibration software service for use in fast, accurate calculation of VA hedging greeks.
B&H Hedge also provides a real-world modelling capability that can be used in hedging strategy projection (including use of stochastic-on-stochastic).
Market-consistent multi-asset stochastic modelling for calculation of multiple Greeks:
- Joint market-consistent stochastic modelling of multiple equity indices, yield curves and credit risk. Alternative asset modelling for asset classes such as hedge funds and commodities is also available.
- Can be run in multi-currency setting with correlated economies and stochastic FX rates.
- Simultaneous fits to multiple (correlated) equity indices’ option-implied volatility surfaces using Heston-with-jump-diffusion model.
- Arbitrage-free yield curve modelling and the ability to fit to swaption-implied volatility matrices.
- Integrated credit risk modelling (credit spreads and rating transitions / defaults), allowing rigorous measurement of the impact of credit-risky funds on VA liability valuations and greeks.
- Asset modelling choices within the software that can be used to analyse model risk.
