Friday, December 18, 2015

The Fed Awakens - Actuarial Reactions Vary

Image from Jeff Burney at
The rumors, speculation and controversial photos of the fed funds rate looking a bit pudgier than normal can come to an end as Janet Yellen confirmed that rates are no longer zero.

The recent Fed announcement that marked the end of easy money also sparked interesting reactions from the actuarial community.

One actuarial student was particularly stoked that her projection model anticipated the rate hike perfectly. Her excitement was short-lived however as she came to realize that it only did that as a result of a typo in one the formulas feeding the calculation.

For those whose work involved some sort of long tail liability, there were murmurs of jubilation.

Long Term Care, Pension, and other actuaries that deal with fixed income products were among those who welcomed the news. "I wasn't sure what would happen first, rates coming back to normal or a Genesis reunion tour." Expressed an actuarial consultant.

Among those not as thrilled are those who deal with fixed income products (yes they were part of the celebration too) and other actuaries exposed to the risk of disintermediation. Also among those that put a thumbs down emoji in their reactions are recent FSAs shopping for a new house.

In addition to joy and consternation, actuaries are expressing relief, cynicism, bewilderment, and complete indifference. 

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