Global Financial Crisis
Global Financial Crisis
The global financial crisis sent shock waves through every area of the financial services industry. In these articles, we investigate how the crisis occured and what's coming next.
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Stochastic modelling in wealth management: did we spot a black swan?This report considers the performance of the Barrie & Hibbert stochastic model from the end of 2007, through the period of equity market turmoil during late-2008. We provide results which demonstrate that the model had indeed assigned a reasonable probability weight to the events of 2008. In addition, we show that the ‘extreme’ events of 2008 had very limited impact on the assumptions within our model, and the associated distribution of asset return outcomes. This suggests that an advisor or wealth manager who had relied on a Barrie & Hibbert stochastic projection immediately before this period of equity market turmoil would have been strongly placed to justify financial planning decisions which had been based on the outputs from the model.
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Is there a case for a less severe equity stress test following 2008 returns?
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What Just Happened?
Craig Turnbull offers a series of perspectives on the global financial crisis.
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After the Storm: Market-consistent measures of cost and solvency in 2009
Financial market experience in 2008 could have been taken straight from a global insurance group's Board paper on the "perfect storm stress test". This environment has substantially impaired market-consistent measures of the profitability and capital adequacy of insurance groups. This has prompted some revisions to published guidance and accepted implementation practices for a number of global principle-based market-consistent approaches to the assessment of guarantee costs and capital requirements. This note summarises the 2008 financial market experience, and reviews some of the proposed changes in market-consistent methodologies that have been prompted by it.
