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Research

Research Studies–Proposal Requests

Investment and Finance–Related Research Topics

1. Background

The Society of Actuaries' Committee on Finance Research has as its mission to serve actuaries working in investment and finance–related areas by initiating research projects to better equip them for the challenges of their daily responsibilities and keep them on the leading edge. With these goals in mind, the team is interested this year in receiving proposals for research on a number of specific topics. The specific topics are enumerated in the Research Objective section of this document with the intention to formally initiate projects on 2–3 of the topics this year and additional projects in future years.

2. Research Objective

To advance knowledge in risk management, the Committee on Finance Research would like to receive proposals related to the following topics. Each topics' description has deliberately written to be brief and open–ended in order to give potential researchers sufficient latitude in the development of the proposal:

1. An investigation of indexed options and other hedging methods. In particular, a cost benefit analysis between OTC options and Exchange Traded Options would be of value.
2. An exploration of the basis risk on mutual funds in the context of hedging programs. This is especially relevant for times of high market volatility.
3. Preparation of guidelines for the use of economic scenarios for "risk neutral" valuation.
4. Development and an example implementation of a methodology for the accurate compression and of a time series of complete yield curves.
5. An examination of the measurement of default risk in insurer investment products such as GICs, funding agreements, and annuities.
6. A study that explores the measurement of shareholder value–added to equity for life insurance companies and how various capital requirements could or should be used in computing it for pricing and evaluating financial performance.
7. A determination and evaluation of longevity hedging strategies through reinsurance or investments that would aid in the protection of a company against mortality breakthroughs (such as a cure for cancer, medical technology innovations, etc.).
8. A new Private Equity Exchange clearinghouse has been created to improve the liquidity of private equity. An analysis of this clearinghouse would include a description and various modeling techniques to provide the actuary an understanding of the exchange.

 

Proposals may be submitted on one or more topics. As mentioned in the Background section, it is anticipated that up to 2–3 proposals will be selected this year. Depending on the response, specific proposals may be deferred until next year. In such cases, researchers will be notified as soon as possible.

3. Proposal

To facilitate the evaluation of proposals, the following information should be submitted:

1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
2. An outline of the approach to be used, emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted and possible limitations of the analysis.
3. Cost estimates for the research, including computer time, salaries, report preparation, research costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
4. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions.
5. Ideas regarding the form and distribution of the final report, both for immediate release and for permanent reference (e.g., submission to North American Actuarial Journal, SOA Monograph Series, CD ROM).
6. Other related factors that give evidence of a researcher's capabilities to perform in a superior fashion should be detailed.

 

4. Selection Process

The Committee on Finance Research is responsible for the selection of the proposals to be funded. Input from other knowledgeable individuals also may be sought, but the team will make the final decision. The SOA's Research Actuary will provide staff actuarial support. A POG will be appointed to oversee each project that is initiated.

5. Questions

Any questions regarding this RFP should be directed by fax, or e–mail to: Steven Siegel, SOA Research Actuary (f: 847.273.8578).

6. Notification of Intention to Submit Proposal

If you intend to submit a proposal, please send written notification by November 30, 2007 to Jeanne Nallon or (f: 847.273.8592).

7. Submission of Proposal

Please e–mail a copy of the proposal to: Jeanne Nallon.

Proposals must be received no later than December 15, 2007. It is anticipated that all researchers who have submitted proposals will be informed of the status of their proposal no later than January 15, 2008.

Note: Proposals are considered confidential and proprietary.

 

8. Conditions

The Committee on Finance Research reserves the right to not award a contract for these research topics. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a determination that insufficient funds are available to proceed. The SOA also reserves the right to redirect the projects as is deemed advisable. The SOA intends to copyright and publish the results of this research. The research will be considered work–for–hire and all rights thereto belong to SOA. However, appropriate credit will be given to the researcher(s).