Handbook

This course is to provide students with an appreciation of the mathematical and economic models of investment markets and highlight their application (and shortcomings) in asset-liability management for insurance, superannuation and funds management and in the pricing of derivatives. 

Topics covered include; risk and utility; risk measures; mean variance models; factor models; asset liability models using portfolio selection models; equilibrium and arbitrage-free valuation; valuation of derivatives; term structure models; credit risk models and actuarial stochastic investment models and their application. The topics will be illustrated with applications to the valuation and risk management of insurance and superannuation contracts especially those with embedded options and financial guarantees - with a particular focus on the inadequacies of the models for investment risk management. The course will include case studies on investment and derivative disasters.