View Full Version : 8G Case Study - Table GLD-8

boooeee

10-27-2002, 05:16 PM

I can't seem to understand how the "First Year Annualized" and "Second Year Annualized" numbers are arrived at. If I understand these numbers correctly, the "First Year Annualized" number should be the sum of the probabilities of death and recovery in months 7 through 12. The "Second Year Annualized" number should be the sum of the probabilities of death and recovery in months 13 through 24. The actual numbers on the table are consistently less than my assumption.

Am I missing something here? I would be willing to write it off to rounding differences if my numbers weren't consistently higher.

Not Mike

10-27-2002, 06:15 PM

I don't have the table in front of me, but I'm thinking it should be the cumulative product of (1-term rates) and then subtract that from 1... does that make sense?

boooeee

10-27-2002, 08:11 PM

I don't have the table in front of me, but I'm thinking it should be the cumulative product of (1-term rates) and then subtract that from 1... does that make sense?

Thank You.

So, the probablities in the table are conditional probabilities. In other words, a 22 year old male who has been disabled for 14 months, has a 0.04 chance of recovery or death in the 15th month.

Not Mike

10-28-2002, 01:53 PM

So, the probablities in the table are conditional probabilities. In other words, a 22 year old male who has been disabled for 14 months, has a 0.04 chance of recovery or death in the 15th month.

Yes, that's how I understand it.

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