The Case for Dynamic Replication of Indexed Annuities
Insurers have traditionally managed the market risk exposure from Index Annuities through static hedging programs, purchasing structured hedges OTC. Sustained lower rates and increased competition have led insurers to look for more cost-effective means of providing this market exposure to their policyholders. Dynamic hedging is one promising avenue to reduced costs.
On Wednesday, May 14th featured speaker Mark Hadley, VP of Financial Engineering, explored different strategies for the dynamic hedging of Index Annuities.
Mr. Hadley covered:
- Popular Index Annuity designs
- The mechanics of delta/vega/gamma dynamic hedging strategies
- The many premia of volatility arbitrage, which drive the cost savings seen in dynamic hedging strategies
- Quantify the expected savings and risk from various dynamic hedging strategies
Featured Speakers
Mark Hadley
Mr. Hadley has worked with numerous variable annuity insurers across the industry, whose exposure spans all corners of the globe. He specializes on the capital markets side focusing on financial market modeling, hedge strategy design, and hedge execution.
In his current role with Numerix, he consults with banks, hedge funds, and insurance companies across the globe on how to manage exotic derivative exposure. Prior to Numerix, Mr. Hadley worked with Milliman’s Financial Risk Management group, where he designed and executed several VA and EIA hedging strategies.
As Chief Marketing Officer and Executive Vice President of Global Marketing & Corporate Communications, James leads the company’s global marketing and corporate communications efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to clients in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Since joining Numerix in 2008, James has launched the organization’s award-winning thought leadership program, bringing to light challenges and insights from Numerix market experts. He also hosts the Numerix Video Blog, tackling the challenges pressing the derivatives markets—from regulatory issues to trading strategies.
Prior to joining Numerix, James served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, he built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. Prior to Fitch, James was a member of the communications team at Moody's Investors Service.
