Option/Volatility Risk Clause Samples

Option/Volatility Risk. Volatility risk is the risk of fluctuations in the value of an asset or liability over a relatively short period of time. The volatility risk present with respect to the Company’s portfolio is dependent in part on the composition and relative concentration of the types of investments in the portfolio. In addition, the volatility risk present with respect to the Company’s liabilities is dependent, in part, on the insurance products issued by the Company. Derivative transactions may be used by the Company to reduce the risk of concentration by the Company in any one type of investment (either directly or through the issuance of products tied to an investment), to diversify the Company’s holdings in a tax-efficient and cost-efficient manner and to compensate for fluctuations in the value of the Company’s assets and liabilities. Option risk refers to the risk of fluctuations in the value of options embedded in the Company’s investment portfolios or liabilities. The Company may use derivatives to hedge such risk exposures (commonly known as Delta, Gamma, ▇▇▇▇, Rho and Theta).