Investment-linked Insurance, Investment Risk Management

Unit-linked policy is a new kind of policy, which was introduced to Chia at the latter stage of the 1990's when China insurance was faced with an inside and outside troublesome predicament. Unlike the traditional policy, it cancels scheduled interest rate and makes investment risk management become the nuclear operational process. How to perform effective investment risk management is the important guarantee for the new policies to win in the market and for the insurer's growth.Firstly, this thesis introduces the elementary concept and characteristics of unit-linked policy, then defines and analyses the policy's investment risk, showing that it is greatly necessary for the China insurance to manage the investment risk. Furthermore, the thesis put forward a whole process of investment risk management, consisting of investment risk discrimination, investment risk measurement, the treatment of investment risk and the evaluation of investment risk management. Secondly, the paper summarizes and evaluates some theories and method of investment risk measurement, such as utility theory, variance theory and Markowitz's mean-variance model, Sharpe's Capital asset pricing model and /? coefficient, downside risk and Harlow model and VaR theory and method. It also illustrates the suitable conditions and defects of these theories, and proves that VaR is a more perfect method for risk measurement by comparison in theory and computation.Thirdly, this thesis makes a study of investment risk management based of VaR theory, consisting of investment measurment and control. It introduces and analyses three kind of computational methods of VaR, then gives a demonstration about how to measure risk based of VaR by using the history data from the Shanghai Security Exchange. Furthermore, it gives a quantitative criterion to control the market timing risk and selecting risk and put forward a corrected mean-VaR model to analysis how to construct portfolios in the three investment accounts of a unit-linked policy.