Milliman's performance analysis practice offers essential insight into the effectiveness of hedging programs. We provide a level of analytical detail unusual in the industry, allowing us to pinpoint possible areas for improvement.

Was a gain related to market volatility, interest-rate changes or index fluctuations? Understanding that you can't effectively improve strategy if you don't know why a gain—or loss—took place, our analysis provides detailed breakouts for each variable. We also incorporate the effect of intraday market behavior for a more precise assessment of hedging methods.

In our reporting system, we take the complex dynamics of path-dependent liabilities and derivatives used for hedging and distill them into the key components that drive hedge performance. Our analytical output is customized to the specific needs of each client.

We provide information on a daily, monthly, quarterly and year-to-date basis to traders, risk managers, and management. These detailed reports facilitate effective hedge-program management and provide an early warning system for problems.

Milliman is often engaged to create simplified, dashboard-style reports that improve management's understanding of the connection between market events and hedge-program performance.

Improved hedging performance

A good reporting system will naturally lead to questions about performance and possible strategic changes. Our proactive approach includes formulating recommendations to improve hedging performance.

In the case of one client, Milliman experts detected a pattern of losses related to market volatility. A consultation with the client weighed possible solutions—including changing the amount of volatility hedging or altering the mix of investment instruments being used—to arrive at a more effective strategy for hedging volatility.