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#651




practice question: you are testing a bayesian model that does not include a calendar year trend. The histogram shows your model is biased high. You decide to add a calendar year trend component. Draw what you expect to be the resulting histogram of the posterior distribution for the mean of your new trend parameter.
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#652




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#653




Well I’m back after *checks post history* a month? Jesus. Question on Mack 1994  more so trying to make sure I have this right:
CF has a section on how individual reserve squared standard errors don’t add to the total reserve squared standard error. However, the cookbook has a recipe on using the same lognormal formulas as those for individual accident years (formulas [10]) from the paper). Is it ok to use these formulas on the overall reserve?
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ACAS 7 
#654




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#655




I believe it's true that the sum of the squares of the individual reserve standard errors don't add to the reserve squared standard error. (See Mack eq 11). However, once you do have the total SE, you should be able to use the same *procedure* (equivalent version of eq. 10) as a step toward calculating confidence intervals for the total reserve estimate. I don't intend to memorize eq. 11, however, since one problem of that type would probably take me more than 4 hours without a spreadsheet to calculate. I'll probably try to remember eq 7, though to apply to an individual accident year

#656




I'm now about halfway done with Brehm and going through past problems. TIA seems to be way too detailed for Brehm, but I suppose that's better than not having enough information and skipping things. Brehm definitely feels like my weakest section (probably because a lot of it is qualitative), but overall I'm starting to feel okay about this exam.
Goal is to finish Brehm at 6 weeks out, then start reviewing everything to fill in all the details. Now that I think about it, I finished all the material for exam 6 and started reviewing 5 weeks out, so I guess I'm a little ahead of schedule compared to then. And since this exam does feel a lot like 6, I guess that's a good thing. When I took 6 I definitely was weakest on the SAO section and it feels analogous to how I feel about Brehm at the moment. But I guess that's fine as long as I nail the other stuff down. 50 days left! 
#657




Do y’all think the reserving papers (or any specific ones) are prerequisites for Goldfarb and Brehm? Given the syllabus weight for those I’m thinking about setting some mandatory start date for myself on those papers, like a month out.
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ACAS 7 
#658




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An understanding of the valuation process should be beneficial to understand some of the knowledge points in Goldfarb but particular methods don't really matter. Brehm is related to stochastic methods in the sense that they provide distributions for unpaid losses, and those distributions can be used in an enterprise risk model. Meyer's even starts off his paper by saying that distributions are becoming more important due to an increased application of enterprise risk management techniques to insurance. Finding the connections to reserving methods might help your recall of certain sections of Brehm and understanding what the story is all about but you just need to know the concepts mostly
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#660




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The hard part would be that it is on a calendar year basis, and the paper that covers reinsurance contracts has examples of converting policy year and accident year. I suppose nothing is stopping them from doing the balance sheet as PY or AY and then giving us everything we need on the premium and discounting side. I'm not sure if such a calculation is on the syllabus (feels more like an exam 6 or exam 9 topic), but if they wanted to do a synthesis question with Goldfarb that's how they would have to do it. Relating Brehm and Goldfarb, you cannot simply add lines of business because of the interline correlation. That's also an issue for Shapland if you wanted to ODP Bootstrap your way to an Enterprise reserve. Marshall also covers a similar topic with the correlated CoV's. 
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