Page 388 - 2019 6th AFIS & ASMMA

» Panelist | Tyler T. Yang
» Moderator | Richard K. Green
Okay, thank you, Tyler. So, let me ask you one question before we
move on to our discussants. Do you think breakeven is the right aim
or should we mind tail risk? Whether you subsidize or not, given the
expected return, there's a 50% or more chances where everything's going
to be fine. But, there is also a chance that the size of the losses expands
substantially when something goes badly wrong, which would be of
interest particularly with regards to taxpayer supporting programs.
390
Yes, I think for pricing purpose, breakeven should be the right
concept. But, it was great point to raise the question. Given the payoff is
the asymmetric to the house price appreciation, they're just taking the
expected house price to draw your breakeven rate, which can be biased.
Since we took over the HECM actuarial review, we actually use the
Monte Carlo simulation to find out the break-even point, by calculating
expected losses as per different potential house price appreciation rate.
» Moderator | Richard K. Green
But even so, there still may be a tail of losses in the extreme cap. So
at what extent do you want to limit that extreme tail, or do you want to
limit it? Session III
» Panelist | Tyler T. Yang
Yeah, if we are dealing this with a private market, to get a Triple A
rating, we need to have 99.5 percent risk bar. But for the government,
which has social responsibilities, we expand that to 5 percent and 10
percent far, which will basically be 90 to 95 percent confidence. That will
become their capital requirement.
» Moderator | Richard K. Green
Okay, thanks. Let's move on to our discussants. First, we're going to
have In Seong Hwang from our host organization for this conference. Say
a few words?
» Panelist | In Seong Hwang
Head of Housing Finance Research Institute, Korea Housing Finance Corporation
Yes, it's a very nice and intuitive session, so I am very glad to
participate in the discussion and talk about our product. Okay, I
prepared some slides, so let me start.
2019 6th AFIS & ASMMA Annual Meeting 391