Comparison of methods for fair-value life insurance liabilities
Let me comment on some of the terms in the title of this chapter. First of all, the term ‘fair value’ should lead one to conclude that this is a discussion of formal methods for determining accounting values under generally accepted accounting principles (GAAP) in the USA. The term ‘fair value’ is used rather than ‘market value’, because it is (correctly, I believe) held by the Financial Accounting Standards Board (FASB) that a market value can only mean a value determined as the price at which a willing buyer and a willing seller engage in a transaction. Any analytical estimate of the market value has to be something other than the market value itself. For such analytic estimates, FASB has come up with the term ‘fair value’.
KeywordsInterest Rate Cash Flow Life Insurance Capital Gain Generally Accept Accounting Principle
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