This course provides a practical overview of portfolio replication for insurance, with hands-on training in the construction of replicating portfolios.

• Discuss the various concepts of portfolio replication, including theory, processes, and applications
• Understand how RiskWatch and ARA are employed as key Algo components in portfolio replication construction
• Describe the primary steps in portfolio replication
• Select specific replicating asset types
• Describe the Mark-to-Future cube generation process, and build MtF Cubes in RiskWatch for both the assets and liabilities based on the impact of a pre-defined economic scenario set on a variety of risk factors
• Create a replicating portfolio from a given asset universe, using ARA's optimization module
• Use trade restrictions and penalties to improve the quality of replicating portfolios
• Assess the quality of replicating portfolios, including in-depth post-optimization goodness-of-fit analysis in ARA

This advanced course is for the insurance industry end-user, particularly risk managers, risk analysts, and actuaries.

Prior training and/or experience in RiskWatch and ARA is strongly recommended.

The two-day course balances instructor-presentation of key portfolio replication for insurance concepts with hands-on training in replicating portfolio construction. Day 1 focuses on the purpose, theory, applications, and process of portfolio replication including familization exercises and demonstrations. Day 2 is a workshop where students employ the optimization functionality of the Algo Risk Application (ARA) to build actual optimal replicating portfolios.

Day 1:

• PortfoIio Replication Overview: Purpose, Applications, Process and Theory
• Algo Portfolio Replication Components: RiskWatch and Algo Risk Application (ARA)
• The Steps to Portfolio Replication
• Replicating Universe Asset Types - Modeling in RiskWatch
• Mark-to-Future Asset and Liability Cube Creation in RiskWatch
• RiskWatch Workshop - Creating MtF Cubes in the Stress Room
• Portfolio Optimization in ARA
• Building Portfolio Replication Optimization Problems in ARA
• Assessing Replication Quality: Goodness of Fit Metrics, Standard RP Reports, and Deficiencies
• Improving Replications using Trading Restrictions

Day 2:

• Portfolio Replication Hands-On Workshop using ARA Optimization Module
• Open Discussion and Wrap-Up