How to valuate future cash flows is a fundamental problem in both finance and actuarial science. (Pricing of financial products, premium and technical provisions of insurance contracts). However, traditional ways of valuing actuarial or financial liabilities are quite different. In Finance, the pricing is based on risk neutral expectations of discounted cash flows, originally justified by hedging portfolios. In Insurance, premium calculation principles use a real world best estimate value plus a risk premium, given for instance by a standard deviation approach and justified by pooling effect of independent contracts. This dichotomy of paradigm is debatable and could encourage us to find a unifying tool. This also becomes a real challenge when it comes to pricing for instance hybrid life insurance or pension products mixing actuarial and financial risks. Different techniques have been recently developed in the actuarial literature in order to address this fundamental valuation problem in a harmonious manner, in order to remain simultaneously market consistent and actuarial consistent. Another issue when pricing insurance risks is the presence of diversifiable and systematic risks requiring also different risk measurement. Finally, when the valuation has to be dynamic (for instance technical provisions), the time consistency of the method is an additional difficulty.

The web session is open to all persons, interested in the valuation and pricing of actuarial liabilities mixing different kinds of risk, especially in the framework of Solvency II.

Technical Requirements
Please check with your IT department if your firewall and computer settings support web session participation (the programme Zoom will be used for this online training). Please also make sure to join the web session with a stable internet connection.

The objective of this web session is to present various recent researches developed in the actuarial literature, in order to valuate complex cash flows mixing financial and actuarial risks. After an introduction presenting the main challenges, we develop several approaches recently proposed. All the techniques will be applied to a typical participating life product and numerical illustrations will be given.

The language of the web session will be English.

Pierre Devolder
Pierre DEVOLDER is professor of mathematical finance and actuarial science at the Catholic University of Louvain (UCL) (Institute of Statistics, Biostatistics and Actuarial Science, ISBA/LIDAM, Belgium). He has a PhD in mathematics from the University of Brussels. He is also actuary and academic member of the Belgian Institute of actuaries (IABE). His main research activities are focused on stochastic finance, life insurance and pension theory. He has published 6 books on pension and finance and many papers in various actuarial journals. He gives regular courses at the universities of Brussels, Strasbourg and Rabat. He is chairman of the board of REACFIN (actuarial consulting company).