There is an increasing complexity of risk neutral valuation models in the insurance industry, along with a growing regulatory attention on them. In particular, regulators require the interest rate model to replicate observed market prices, a key driver of model complexity, especially in terms of number of parameters involved. To highlight the benefits of one particular model, we cover the following topics:

• Analysis of market conditions for the three dates of interest
• Overview of the three variants of the Libor market model
• Comparison of the market consistent property of the three models
• Refinement of the model with constant elasticity volatility