Risk Neutral ScenariosEconomic models support analysis of investment strategies
Risk-neutral valuation techniques are standard practice in the financial industry to determine the market value of financial options. Ortec Finance provides risk-neutral scenarios which enable you to make accurate, fast and robust valuations of profit sharing and return guarantees in insurance products. We support insurance companies by delivering calibrated risk-neutral scenarios with a state-of-the-art risk-neutral Economic Scenario Generator (ESG), expert support and required documentation.
Our calibrated risk-neutral scenarios are highly accurate for prevailing market conditions, including skews and smiles in implied volatility surfaces.
Outstanding risk-neutral models
At any point in time, the risk-neutral scenarios of Ortec Finance reflect a highly accurate fit with prevailing market conditions, including the skews and smiles in implied volatility surfaces. This contributes to the accuracy of the valuations that are carried out in the scenarios. Our risk-neutral scenarios also allow for fast valuations due to the good convergence properties. As a result of these good conversions, the evaluation calls for fewer scenarios. Only a small number of Monte Carlo simulations are necessary, because of the demanding calculations in the actuarial systems used by insurance companies to perform the valuations. Moreover, the robustness of the selected models supports reliable and stable valuation results over time. Besides risk-neutral scenarios, Ortec Finance also provides realistic real-world scenarios for investment decision making and risk management purposes.
The good convergence properties of our risk-neutral scenarios allow for fast valuations to support demanding calculations in actuarial systems.
A powerful risk-neutral scenario generator
The calibrated risk-neutral scenarios of Ortec Finance are generated with a powerful Economic Scenario Generator (ESG) which is a module of GLASS. This module generates risk-neutral scenarios for monthly market conditions. It allows you to construct scenarios based on shocked market conditions, in order to calculate the necessary sensitivities of option values. Examples include the UP and DOWN interest rate shocks under Solvency II. The risk-neutral scenarios can either be used within GLASS or exported to your proprietary valuation models.
Our powerful risk-neutral Economic Scenario Generator (ESG), expert support, and required documentation support insurance companies.
- Accurate valuations: excellent fit with prevailing market conditions, including skews and smiles in volatility surfaces, and accurate replication of martingale properties
- Fast valuations: due to good convergence properties only a small number of Monte Carlo simulations are needed
Robust valuation results: the robustness of the selected models supports reliable and stable valuation results over time
Coverage: wide coverage of assets and regions, and tailoring to client-specific needs
Integrated solution: risk-neutral and real-world ESG modules integrated in GLASS for risk-management applications
Export of scenarios: export facilities to use scenarios in actuarial and/or valuation models
Rooted in academic research: good convergence properties and fast, reliable and stable results based on academic research
Continuous improvement: continuously tested and improved through practical experience and academic research