Centro de Documentación de Fundación MAPFRE - Discounting the discounted projection approach

MAP20230012468

Discounting the discounted projection approach / Dean Buckner & Kevin Dowd

Sumario: U.K. equity release actuaries are using a flawed approach to value the no-negative equity guarantees in their equity release mortgages. The approach they use, the discounted projection approach, incorrectly uses projected future house prices as the underlying prices in their put option pricing equations. The correct approach uses forward house prices. The discounted projection approach entails significant undervaluations of no-negative equity guarantees and overvaluations of equity release mortgages and can produce valuations that violate rational pricing principles. The discounted projection approach is also inconsistent with both actuarial and accounting standards. Our results have significant ramifications for equity release industry practice and prudential regulation

En: North American actuarial journal. - Schaumburg : Society of Actuaries, 1997- = ISSN 1092-0277. - 05/12/2022 Tomo 26 Número 4 - 2022 , p. 521-536

1. Cálculo actuarial . 2. Hipotecas . 3. Política de precios . 4. Análisis de datos . I. Dowd, Kevin .