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AXIS Module - Reinvestment

The AXIS Reinvestment Module can be used at the higher level once total asset and liability cashflows are combined to calculate the net cashflow available for reinvestment. A Reinvestment Strategy can be defined which uses accumulated positive and negative net cashflows on a monthly, quarterly or annual basis to model the sale of existing assets, the purchase of new assets at market prices, or combinations thereof.

The amount available for Reinvestment can be invested in the following ways:

  • Designated Cashflows
  • Asset Maturities, Sales or Salvage values can be allocated separately from the aggregate portfolio.
  • Fixed Dollar Allocations
  • Specified fixed dollar commitments to purchase notional assets.
  • Initial Matching Strategy
  • Cashflow Matching, positive or negative, or
  • Duration Matching
  • Allocate investable cashflows using either:
  • Cashflow Allocation, or
  • Target Allocation, or
  • Blended Allocation (combination of Cashflow Allocation and Target Allocation).
  • Final Matching
  • Rebalancing of the dollar durations of the asset and liability portfolios by means of interest rate swap(s).

Along with the above, there is an option in AXIS whereby the Maximum Allocation to specified asset classes for the aggregate portfolio can be specified.

Negative cashflows, from operations or portfolio rebalancing, can be handled in one of 3 ways:

  1. Borrow at a rate tied to the economic scenario or at a fixed rate
  2. Purchase negative notional securities, which simulate the sale of an actual inforce asset in terms of yield impact.
  3. Sell actual inforce assets with realized gain or loss.

Reinvestment assets used in a reinvestment strategy are modeled similarly to inforce assets. They include:

  • Bonds
    • Callable
    • Putable
    • Non-callable
    • Sinking Fund Bonds
    • Real Return Bonds
  • Mortgages
    • Residential
    • Commercial
  • Stocks
  • Real Estate
  • Interest Rate Swap (beta feature)
  • Currency Swap (beta feature)
  • Collateralized Mortgage Obligation (beta feature)
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