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Current Developments in Embedded Value Reporting

Author

Listed:
  • O'Keeffe, P. J. L.
  • Desai, A. J.
  • Foroughi, K.
  • Hibbett, G. J.
  • Maxwell, A. F.
  • Sharp, A. C.
  • Taverner, N. H.
  • Ward, M. B.
  • Willis, F. J. P.

Abstract

This paper reviews the developments in reporting of traditional embedded value and summarises some of the reasons why this is now undergoing change. It considers the purpose of an embedded value calculation and the effect of differing attitudes to risk. It comments on the recently developed European Embedded Value Principles and sets out the main areas where scope remains to apply judgement. The paper proposes the market-consistent embedded value framework as a way forward to help provide guidance in some of these areas, in particular on the choice of discount rate and on calibration of stochastic techniques used to value embedded options and guarantees. The paper recognises that market-consistent embedded values are in relative infancy and sets out areas for possible future development.

Suggested Citation

  • O'Keeffe, P. J. L. & Desai, A. J. & Foroughi, K. & Hibbett, G. J. & Maxwell, A. F. & Sharp, A. C. & Taverner, N. H. & Ward, M. B. & Willis, F. J. P., 2005. "Current Developments in Embedded Value Reporting," British Actuarial Journal, Cambridge University Press, vol. 11(3), pages 407-479, August.
    • Handle: RePEc:cup:bracjl:v:11:y:2005:i:03:p:407-479_00
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    Cited by:

    1. Makoto Hasegawa & Jefrey L. Hoopes & Ryo Ishida & Joel Slemrod, 2013. "The Effect of Public Disclosure on Reported Taxable Income: Evidence From Individuals and Corporations in Japan," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 571-608, September.
    2. Nenita B. Nagarit, DBA & Susana C. Bautista, EdD & Ferdinand C. Somido, PhD & Pedrito Jose V. Bermudo, PhD & Antonio D.Yango, PhD & Leomar S. Galicia, PhD, 2018. "Transforming Online Negative Blogs in the Use of Credit Cards in Electronics Transactions into Constructive Action: Basis of Creating Business Spend Analyzer Model," Journal of Business & Management (COES&RJ-JBM), , vol. 6(1), pages 66-83, January.
    3. Hölscher, Luise & Harding, Perham & Becker, Gernot M., 2005. "Financing the embedded value of life insurance portfolios," Frankfurt School - Working Paper Series 64, Frankfurt School of Finance and Management.
    4. Dorothea Diers & Martin Eling & Christian Kraus & Andreas Reuß, 2012. "Market-consistent embedded value in non-life insurance: how to measure it and why," Journal of Risk Finance, Emerald Group Publishing, vol. 13(4), pages 320-346, August.
    5. Olivieri, Annamaria & Pitacco, Ermanno, 2008. "Assessing the cost of capital for longevity risk," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1013-1021, June.

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