Normally, low interest rates portend fortuitous economic and business conditions. Well, these are not normal economic times.
With the Federal Discount Rate mired at .75 percent and little indication from Federal Reserve Chairman Ben Bernanke that this is going to change anytime soon, a host of challenges present themselves to purveyors of interest rate-sensitive products. For starters, with living benefits becoming an increasing part of variable annuity offerings, low interest rates drive up the cost of providing that guarantee. Low interest rates also drive up the cost of dynamic hedging.
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