Draft Revised Educational Note Supplement: Calibration of Stochastic Risk-Free Interest Rate Models for Use in CALM Valuation (2021)

Publication date: 29-03-2021

Version: Archived

Language available: Bilingual

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The focus of this draft revised educational note supplement is on the development of calibration criteria for calibrating stochastic risk-free interest rate models used in the production of risk-free interest rate scenarios for the Canadian Asset Liability Method (CALM) valuation of insurance contract liabilities. This may require that a large number of scenarios be generated. For valuation purposes a subset of scenarios or a reduced number of scenarios that are meant to represent the full set of stochastic scenarios may be used. Scenario reduction methodologies are beyond the scope of this paper. The actuary may refer to CIA guidance on the use of approximations, and other available literature1 that deals with scenario reduction techniques.

Categories: Practice

Types: Educational note supplements

Topics: Life insurance

Pages: 35

Format: PDF

Accession no.: 221031