eprintid: 241
rev_number: 15
eprint_status: archive
userid: 7
dir: disk0/00/00/02/41
datestamp: 2009-10-19 09:44:26
lastmod: 2015-05-29 19:51:06
status_changed: 2009-10-19 09:44:26
type: report
metadata_visibility: show
item_issues_count: 0
creators_name: Dewynne, Jeff
creators_name: Fischer, Tom
creators_name: Howison, Sam
creators_name: Kulesza, Kamil
creators_name: Lacey, Andrew
creators_name: Piwarska, Karina
creators_name: Wilkie, David
creators_name: Zyskin, Maxim
creators_name: MacDonald, Angus
corp_creators: Stewart Richie
title: Estimating the volatility of property assets
ispublished: pub
subjects: finance
studygroups: esgi64
companyname: Actuarial Profession
full_text_status: public
abstract: When an investor is allocating assets between equities, bonds and property, this allocation needs to provide a portfolio with an appropriate risk/return trade-off: for instance, a pension scheme may prefer a robust portfolio that holds its aggregate value in a number of different situations. In order to do this, some estimate needs to be made of the volatility or uncertainty in the property assets, in order to use that in the same way as the volatilities of equities and bonds are used in the allocation. However, property assets are only valued monthly or quarterly (and are sold only rarely) whereas equities and bonds are priced continuously and recorded daily.

Currently many actuaries may assume that the volatility of property assets is between those of equities and bonds, but without quantifying it from real data. The challenge for the Study Group is to produce a model for estimating the volatility or uncertainty in property asset values, for use in portfolio planning. The Study Group examined contexts for the use of volatility estimates, particularly in relation to solvency calculations as required by the Financial Services Authority, fund trustees and corporate boards, and it proposed a number of possible approaches. This report summarises that work, and it suggests directions for further investigation.
date: 2008
citation:   Dewynne, Jeff and Fischer, Tom and Howison, Sam and Kulesza, Kamil and Lacey, Andrew and Piwarska, Karina and Wilkie, David and Zyskin, Maxim and MacDonald, Angus  (2008) Estimating the volatility of property assets.  [Study Group Report]     
document_url: http://miis.maths.ox.ac.uk/miis/241/1/ESGI2008ReportActuarial.pdf