System and method for hedging portfolios of variable annuity liabilities

A system for attributing a change in liability valuation for a hedge program to one or more risk factors associated with a valuation model for the hedge program comprising:

• a computer memory containing a mathematical expansion of the valuation model associated with the hedge program for each risk factors associated with the valuation model;
• a computing system in electronic communication with the computer memory for calculating one or more partial sensitivities of the mathematical expansion to the valuation model;
• an input interface for receiving market data for each of the risk factors;
• a computing system for allocating the change in liability valuation to the one or more partial sensitivities by applying the changes in risk factors, obtained from the input interface, to the partial sensitivities;
• a computing system for calculating the estimated change in liability valuation using the partial sensitivities and the changes in risk factors;
• a computing system for calculating a remainder value by comparing the estimated change in liability value to the actual change in liability value;
• and
• an output interface for reporting the changes in the liability valuation with respect to each of the one or more risk factors and the remainder value;
• whereby the change in liability valuation is allocated to one or more partial sensitivities and a remainder.