The ERA of ought eight now allows the infusion of an assumed interest rate [3rd segment rate] into the determination of average value but it does not appear the corridor has been expanded. Thus, if assets lost 30% from At-1 to At, the maximum average value would be 70% x At-1 x 110%. or 77% of At-1. In short, you're still in the toilet, because you're down nearly 30% (the loss plus what you were expected to earn). Conclusion: Rah!
Any disagreement?
Full Version: Asset Averaging under ERA
Agreed. And if we get a recovery above the third segment we have that dragging us. Smoke, mirrors, and a ball and chain.
MISSION ACCOMPLISHED
MISSION ACCOMPLISHED
QUOTE (Andy the Actuary @ Dec 16 2008, 09:44 AM) 
The ERA of ought eight now allows the infusion of an assumed interest rate [3rd segment rate] into the determination of average value but it does not appear the corridor has been expanded. Thus, if assets lost 30% from At-1 to At, the maximum average value would be 70% x At-1 x 110%. or 77% of At-1. In short, you're still in the toilet, because you're down nearly 30% (the loss plus what you were expected to earn). Conclusion: Rah!
Any disagreement?
Any disagreement?
Agreed and it also doesn't specify which month we get the 3rd segment from when it might matter. Is it implied that its the month of the your funding rate assumptions??
QUOTE (dmb @ Dec 17 2008, 02:59 PM)
QUOTE (Andy the Actuary @ Dec 16 2008, 09:44 AM)
The ERA of ought eight now allows the infusion of an assumed interest rate [3rd segment rate] into the determination of average value but it does not appear the corridor has been expanded. Thus, if assets lost 30% from At-1 to At, the maximum average value would be 70% x At-1 x 110%. or 77% of At-1. In short, you're still in the toilet, because you're down nearly 30% (the loss plus what you were expected to earn). Conclusion: Rah!
Any disagreement?
Any disagreement?
Agreed and it also doesn't specify which month we get the 3rd segment from when it might matter. Is it implied that its the month of the your funding rate assumptions??
Sure, and what segment rate do you use to get from At-2 to Ati1? For example, 2009, 2008, or 2007.
This is a "lo-fi" version of our main content. To view the full version with more information, formatting and images, please click here.