New Valuation and Parallel Simulation Methods for Finance and Insurance

Funding: 2010: $431,094

Project Member(s): Platen, E.

Funding or Partner Organisation: Australian Research Council (ARC Discovery Projects)

Start year: 2010

Summary: A new generation of efficient parallel simulation technology will be developed for complex, high-dimensional valuation problems in the finance and insurance sector. Platen s innovative benchmark approach addresses a fundamental empirical inconsistency of modern finance, leading to serious overpricing. This new paradigm will be extended to insurance and other areas of risk management, demonstrating that many insurance and superannuation products can be created for less than half the currently marketed price. The proposed breakthrough in simulation technology will reduce the time for computing such complex contracts and the measurement of risk for large nonlinear portfolios from several hours down to seconds.

Keywords: parallel Monte Carlo simulation; valuation and risk measurement; superannuation; insurance; benchmark approach; variance reduction;

FOR Codes: Finance, Investment and Risk Management, Financial Mathematics, Finance Services, Superannuation and Insurance Services

Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.