On the Determination of Capital Charges in a Discounted Cash Flow Model. Eric R. Ulm Georgia State University

Transcription

1 On h Dmnaon o Capal Chags n a Dscound Cash Flow Modl c R. Ulm Goga Sa Unvs

2 Movaon Solvnc II Rqud sss dmnd on a consoldad bass sss allocad o h lns o busnss on a magnal bass Dvson no Rsvs and Capal s ln b ln Do Capal Chags on capal and chang n svs cancl o pomanc analss o ln manags?

3 Movaon Mulpl Canddas o Rsvs: U.S. Sauo Rsvs; U.S. G Rsvs; U.S. a Rsvs; Fa alu o abls; sss a a somwha consvav solvnc sandad Solvnc II uss 75%; pcd oss und h alsc masu dscound a h sk- a.

4 Incom lss Capal Chags omanc valuaon 5 5 a Rsvs valuaon Rsvs Ya

5 Dscound Cash Flow Modl Ms and Cohn 987 Cummns 99 alo 994 ssums svs a chncal svs.. dscound valu o pcd losss F paam s capal.. asss = capal + chncal svs. Ovvw n Cummns and hllps

6 ampls Sngl mum / Sngl oss CF CF CF CF CF - CF CF CF CF

7 ampls Sngl mum / Sngl oss quvalnl

8 ampls Sngl mum / Sngl oss valuaon Rsvs and capal solvs o b nducon

9 ampls Sngl mum / Sngl oss Mo nuvl...

10 ampls Mulpl mum / Mulpl oss onsochasc and.. losss a uncolad and pmums pad wh can... Ohws plac wh n h pmum quaons and wh n h sv quaon. Mak smla subsuons o

11 ampls Mulpl mum / Mulpl oss Mo nuvl... Dnng accall h and on dpnd on h pmums.

12 ampls Mulpl mum / Mulpl oss

13 Solvnc II Con On od In on a asss a and labls a. Solv o nd mum s R R wh

14 Solvnc II Con Mulpl od as pod s smla: Oh pods qu h dmnaon o M M ~ K nsgh: h pmum whch would b chagd a m o cov h loss a m mus b M and hs pmum can b ound om h pvous analss. Fnd h mak valus cusvl.

15 Solvnc II Con Mulpl od M M M R M R sss om

16 Solvnc II Con Mulpl od R sss

17 Solvnc II Con Mulpl od ann s R R ann Rs R Rs ann valuaon Rsvs ann

18 a Rsvs a q. ncpl svs a 7%. Guss sss a ampls wo od oss % % M

19 ampls wo od oss Mak alu o abls a M ss M

20 ampls wo od oss Balanc Sh Ims o wo mum wo oss ampl m Capal M Incom Samn Ims o wo mum wo oss ampl Cash Flow CF Incom Cash Chang n Capal Chags

21 ampls wo Ya m $ ac dncal ndvduals q.. 5 q 98 s bnomal wh pobabl.5 s bnomal wh pobabl

22 ampls wo Ya m M * M 99.5% solvnc a = 968 Dmn

23 ampls wo Ya m pcd M Capal Balanc Sh Ims o m ampl Incom Samn Ims o m ampl Cash Flow Chang n CF pcd Cash Incom pcd Capal Chags

24 ampls Whol W nd ssum Solv o D d c M ~ ~ D D D c D b a d k k k k k k k

25 ampls Whol Fnall whw... hn gvs q p M ~ p p d c M d c

26 ampls Whol 98 CSO on 4 a old. ssumpons mum quvalnc ncpl $3.3 Sol 99.5% a 6% $34.95 Sol 99.5% a 6.5% $7.8 Sol 99.5% a CRM 6.5% $3.37 Sol 99% a 6% $33.5 Sol 95% a 6% $9.8

27 ampls Whol Cash Flow pcd CF Cash Incom Chang n pcd Capal Chags Chang n pcd Cash Incom dusd pcd Capal Chags dusd Incom

28 ampls Whol pcd Balanc Sh Ims a Rsvs valuaon Rsvs Mak alus Rqud sss

29 Incom lss Capal Chags ampls Whol omanc valuaon 5 5 a Rsvs valuaon Rsvs Ya

30 ampls GMDB d S d q q S M S q S d ln S d ln

31 ampls GMDB s S s s qma M q S Solvnc con gvs ~ ~ s S q S

32 ssum ampls GMDB 6% 34% q % % om opon pcng ho..94 s h paam and quaons gv:.7%

33 alu ampls GMDB sss val Rsv Capal M -.4 Sock