Applying Deep Hedging t Variable Annuities
Abstract
Deep hedging is an exciting new machine learning application in front office derivatives risk management, where a neural network replaces traditional risk neutral pricing and risk formulas. It has the advantage of reproducing traditional derivative pricing when the assumptions behind risk neutral pricing hold, but extends naturally to real-world cases where those
assumptions are broken. I'll discuss the technique and look at an application of it to the problem of managing variable annuities, a popular investment vehicle issued by life insurers.
Bio
Mark Higgins is the co-founder and Chief Analytics Officer at Beacon Platform Inc, a financial technology company that provides an enterprise technology platform for capital markets, aimed at quants, data scientists, and front office developers. Prior to co-founding Beacon in 2014, Dr Higgins spent eight years at JPMorgan Chase, where he launched the Athena project and co-headed the Quantitative Research group for the Investment Bank. He spent eight years at Goldman Sachs as a quant on the FX and interest rate desks, and has a PhD in astrophysics from Queens University in Canada.
