In IFRS 17, what is a reference curve
A standardized yield curve used to facilitate comparison amount entities in the unobservable period.
Is this a curve of discount rates by maturity? Can I think of this like a yield curve, or is the concept completely different?
How does this compare to Ultimate Risk-Free Rate? Are the concepts connected?
Comments
Yes, the reference curve can be thought of as a yield curve.
The ultimate risk free-rate would be part of the reference curve.
Usually, when you derive your reference curves, you'd use some form of GoC bonds which only have traded maturities up to 30 years into the future and this is called the observable period. If you need to discount claims 30 years ahead, you'd need to derive another estimate for the unobservable period and this is the ultimate risk free rate.