Episode 100: Actuaries in Research - Part 2 (Part 2)

Live With The Maverick

My guest for Episode 100 is David Wilkie, CBE, FFA, FIA, FSS, FIMA, Hon D Sc, Hon D Math, Chairman at InQA Limited.
The theme for the episode is 𝗔𝗰𝘁𝘂𝗮𝗿𝗶𝗲𝘀 𝗶𝗻 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 - 𝗣𝗮𝗿𝘁 𝟮.
David and I covered the following topics in 𝗣𝗮𝗿𝘁 𝟮 of this historic episode:⁣
✅ Modeling uncertainty within insurance, finance, and risk mgmt
✅ Shortcomings of the Black-Scholes option pricing model
✅ The origins and evolution of the Wilkie Model for economic variables
✅ Realistic disaster scenarios for marine insurance
✅ The financial crisis, agency risk, and model hazard
✅ Helping to shape actuarial standards and practice globally
✅ David’s new unreleased research paper
𝗣𝗮𝗿𝘁 𝟮 Time Markers
1:25: Random walk hypothesis and modern financial economics.
2:49: Unit-linked life insurance policies and connection to share price uncertainty.
6:30: Foundations of the first Wilkie Model (retail prices, dividends, dividend yields, and long-term interest rates).
8:40: Limitations of Black-Scholes option pricing model assumptions (share price, transactions costs, and hedging constraints).
13:25: The key innovation for the first Wilkie Model (incorporating stochastic framework, variability, variable interrelations, and autoregressive methods).
16:30: The second Wilkie Model (short-term interest rates, property, property yields, and foreign exchange rates).
19:05: Index-linked yields and modifying long-term interest rate assumptions.
22:02: Incorporating company earnings and payout ratios (dividend payout and price/earnings) into Wilkie Model.
23:56: Realistic disaster scenarios, evaluating extreme losses for oil industry, and Lloyd’s syndicate as-if reserves.
30:16: Incorporating parameter uncertainty into Wilkie Model (hyper model approach).
32:51: Using fatter tail distributions (Normal, hyperbolic, and Laplace) for variables with extreme values and high kurtosis.
38:06: Transparency challenges around economic scenario generation.
39:03: Packaging of mortgages leading up to 2008 financial crisis and resulting implications.
42:32: Misaligned incentives in corporate taxation (interest
payment deductions).
46:33: Involvement with actuarial and scientific organizations.
50:30: Approved directive for life insurance valuation principles to address country-level disconnects.
52:26: Research that David hasn’t done yet but intends to do.
If you are an actuary interested in research, modeling, and programming, you want to listen to this.
My Website: maverickactuary.com