Risk Management
Task Force

Extreme Value Models (EVM) Minutes

 

Extreme Value Models (EVM) Conference Call
May 24, 2005
12PM Central Time

Participants
Bob Guth (Leader), Max Rudolph, Steve Craighead, Jonathan Wang, Bernie Rabinowitz, Cliff Angstman and Scott Orr

Secretary for call: Max Rudolph

Web liaison: Kevin Strobel

The minutes from the April 12 call have been posted to the SOA web site.

1. Update on who is participating in the EVM Research Committee, as this group is renamed.

Members of the EVM Research Committee are
Bob Guth (chair)
Steve Craighead
Kevin Strobel
Steve Hodges
Max Rudolph
Bernie Rabinowitz
Thomas Edwalds
Cliff Angstman
Scott Orr
Steve Meyers
Jonathan Wang
Also Julie Young SOA staff contact
Fred Tavan ERM Research contact

Bob welcomed Jonathan Wang to our group. Not an actuary, he brings expertise from his role in the Corporate Risk Measurement Group at Northern Trust Corporation including Basel 2 implementation (especially credit risk and operational risk).

2. Update from the Risk Management Section

Max reported that the RMS recently met face-to-face to focus on research and move the section agenda forward. The former Finance Practice Area Research Committee (now housed within the Investment Section) will be utilized as well as Fred Tavan's team. John Kollar has been appointed to the RMS council as the first CAS representative. Bob will contact John to seek out CAS membership on the EVM Research Committee. The RMS by-laws have been changed to include CAS members. A membership survey will be distributed later this summer.

3. Report on the EVM session at the 2005 ERM Symposium

Overall, the seminar boasted nearly 500 attendees, up 50% from 2004. The 2006 seminar will again be held in Chicago in late April. Cliff Angstman reported that the EVM session had about 35 attendees and was well received. The slides and mp3 file can be found at www.ermsymposium.org. Max will contact Hubert Mueller to get Cliff’s original workshop format added to a list of potential session at the 2006 spring meeting.

4. Update on Bob Guth EVM paper.

Bob Guth has submitted his paper to the NAAJ. He was asked to add more examples, which he has done. If it is not accepted there, he will consider other applied actuarial publications.

5. Web site update

No report

6. Brainstorming

We should continue to look for books to review for the website.

Bob will contact John Kollar regarding CAS representation on the EVM group.

Where does EVM fit in – the definition of risk can include either unplanned/unexpected risks or solvency risks. Solvency risk is better tied to the tail of the distribution.

The risk manager will be ingrained in a company’s culture in the future. What should we be doing to prepare for this? This is an opportunity for actuaries to be THE risk experts.

Future discussion might be "How to objectively bring scenario planning into the pricing process." PRMIA says that an expected risk should be priced for while an unexpected risk should have capital applied against it. Using this statement to start a discussion might generate some useful ideas.

How can risks be mitigated rather than just identified?

7. Future calls

On our next call Jonathan Wang will walk through a seminar he co-presented with Paul Embrechts titled “A Practical Discussion of EVT-based Modeling of Operational Risk”.

On a future call we will review the David Sanders (UK actuary) paper. Bob will forward a link to the paper and an mp3 discussion of the paper.

Members of the subgroup were encouraged to periodically confirm that the EVM links are current. At some point, when more are listed, they are likely to be split into categories such as software, theory, applications and risk mitigation.

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