Volatility

Volatility is a measure of how the price of an asset – be it a stock, an option or a fund - changes. Volatility tracks how much the price moves and also how fast it changes. Beta is a commonly used statistical measure that represents volatility, and the higher beta is, the greater the risk. There’s usually a reference index such as the S&P 500 and if a stock perfectly tracks the index, it is said to have a beta of 1.0. If it changes more than the index, be it on the up or downside, it is a high beta stock. For example, a stock with a beta of 1.5 means that historically, it has moved 150% for every 100% move in the benchmark index. Mutual funds nowadays provide free volatility measures so you can get a good feel for how stable the fund is year in and year out.

Bulk Purchase Annuity Market Booming as Pension Deficits Swell

The UK pension market is in tough shape post financial crisis. According to a Bloomberg article, "about 87 percent of the U.K.’s 7,400 final salary pension plans are in deficit following the financial crisis." This crisis offers an unprecendented opportunity for companies that insure the pension liabilities of private corporations through bulk purchase annuities. “The bulk-purchase annuity market is going to continue to be a good market because companies want to get their pension...

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Bulk Purchase Annuity

Volatility

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Financial Crisis

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Bulk Purchase Annuity

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Standalone Living Benefits Provide Guaranteed Income without Annuities

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Guaranteed Lifetime Withdrawal Benefit

Contingent Deferred Sales Charge

Income

Death Benefit

GLWB

Standalone Living Benefit

SALB

Volatility

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Bond Investors Facing Risk and Uncertainty

A recent Wall Street Journal article discusses the range of issues that bond or fixed income investors face in the current environment. The issue is critical for most retirees and near-retirees as they would typically migrate towards the income producing and low volatility aspects of bonds with a portion of their assets. The current environment is tricky, however, since the future path of interest rates and inflation is so uncertain. Some of the key risks that fixed income investors currently...

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Part Two of the Interview with Wharton Professor David Babbel

This is the second part of an interview with Professor David Babbel.

Part one can be found here.

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Sequence of Returns Effect

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The Death of Asset Allocation?

Risk mitigation through diversification across time and space are fundamental tenets of conventional financial theory. In other words, the idea is that stocks are safe in the long-run and risk or volatility can be reduced by owning assets in uncorrelated markets. The problem is that stocks are not necessarily “safe” over any time horizon and correlations between asset classes tend to increase dramatically during times of market distress such as the past year and a half. Target date...

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