Date(s) - 26/02/2021
12:00 pm - 1:00 pm
We present a methodology for one-year VaR capital for mis-estimation risk. Parameter uncertainty is assumed to drive mis-estimation risk, and so the methodology uses a parametric model for various risk factors. Illustrative results for longevity risk are given for a large UK pension scheme, and we discuss the portfolio-specific features that cause capital requirements to rise or fall. As expected, we find that parsimonious models produce lower capital requirements, all other things being equal, but we also find some counter-intuitive aspects of the one-year VaR approach.
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