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Enhanced Stochastic Processing Released (February, 2007)

Article Summary:

Both the regular Block processing and the new Embedded Scenario Processing features have been further enhanced with the release of AXIS 12. And now the beta has been removed from the Stochastic Processing module.

AXIS first introduced new stochastic processing options in 2004, under a beta feature code, based on a new object called the Block which allowed multiple Cells to be processed more quickly and efficiently through multiple scenarios.  New calendar year and summary reporting options were introduced to support the new analytic capabilities, and the Stochastic Processing Module was created to license the new functionality, which originally was available only for Cells in the Annuity module.  Subsequent enhancements extended the Stochastic Processing capabilities out to other Liability Modules as well.

In 2006, the Stochastic Processing Module was further enhanced by the introduction of Embedded Scenario Processing functionality which enabled financial projections produced by the Fund object to be based on additional projections along multiple scenario branch paths at selected future pivot points within the projection period.  Embedded Scenario Processing enables stochastic calculations to be used for both reserve recalculations and required capital recalculations at each selected pivot point, as defined by the embedded Block Projection Assumptions object.

In AXIS 12.0 released in February, 2007, there were a number of new enhancements added to the Stochastic Processing module, including:

  • increased flexibility in the definition of Fund objects which support Embedded Scenario Processing, such as the option to use with Funds with varied proportions attached to included Subfunds, and Cells included within those Subfunds
  • additional options to optimize runtimes in both Block processing and Embedded Block processing, by selecting which elements of the component projections would need recalculation.
  • additional flexibility in defining how reserves and capital can be realistically projected between pivot points when Embedded Scenario Processing is used in the Fund

And most importantly, with the release of AXIS 12, and almost 3 years of experience with and continual enhancements to stochastic processing capabilities, we have removed the Beta code from the Stochastic Processing Module!

Going Forward From Here

We plan continued improvements to Block processing and to Embedded Scenario Processing functionality throughout 2007 to make it more powerful and useful for various applications, including:

  • Use of a similar Embedded Scenario Processing approach for GAAP calculations.
  • More support for VA-CARVM requirements.

In fact, stochastic-on-stochastic is now possible with just the features already introduced since the Fund can be run through many scenarios using the existing AXIS batch functionality.

With all of these enhancements we expect the Stochastic Processing Module to be very useful for a number of applications, including C3 Phase II calculations in the projections, SFAS 97 calculations requiring stochastic projections, pricing of Seg funds and separate accounts, DCAT and planning projections based on CALM liabilities, and GAAP unlocking at future points in the projections.


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