NNEG

AcronymDefinition
NNEGNumber of Negative Eigenvalues
NNEGNorthern New England Gamers (online)
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The annual yield cost y is derived so as to produce the expected present value of NNEG margin equal to the monetary cost of the NNEG.
Table 5 shows the NNEG values, expressed as an annual yield cost, for different genders and ages.
Tables 6 and 7 show the NNEG costs based upon various scenarios.
The cost of the guarantee is highly sensitive to the assumption on the roll-up interest rate; for example, an increase in u by I percent would raise the value of the NNEG for a 60-year-old male borrower by more than 200 percent.
From Tables 6 and 7 we observe that the rental yield assumption is quite important; for example, the NNEG cost for a 60-year-old male borrower would raise by about 130 percent if g is increased by 1 percent, and by about 350 percent if g is increased by 2 percent.
An additional 1-year delay would increase, for example, the NNEG cost for a 60-year-old male borrower by approximately 50 percent.
Mortality deduction will result in a more valuable NNEG due to the increase in both the time to maturity (8) and the strike price of the option.
On the other hand, morbidity and early redemption would lower the NNEG values, since these additional modes of decrement would reduce the likelihood of survival to advanced ages.
Although the underlying asset for the NNEG is unique and infrequently traded, we can dynamically hedge the guarantee by forming a hedge portfolio that has a price sensitivity profile similar to that of the NNEG liability.
In a booming property market, one may feel that the NNEG is not valuable at all.
Decrement assumptions play a crucial role in pricing the NNEG.