Actuarial Outpost > SoA Task 1 - Mean/Variance Matching
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#1
11-12-2017, 06:30 PM
 kts1230 SOA Join Date: May 2016 Posts: 21

Hi Everyone,

I started this module a year ago, got to the EOM exercise, and was very confused and decided to tackle the RET RPIRM exam instead.

Here I am a year later, with a few weeks til expiration, and I'm gonna krank out this MMR .

But a lot of this EOM exercise is still confusing me... Right off the bat, I've got a question with the easiest part of the exercise...

When calculating the mean and variance of the Lognormal and RSLN-2 models, should the mean and variance match exactly? Or just very close?

I'm getting a mean and var for the lognormal of 1.008366 and .002711.
And for the RSLN-2 I'm getting 1.008374 and .00265

Thanks
#2
11-13-2017, 08:46 PM
 thegabesta Member SOA Join Date: Mar 2013 Posts: 148

Quote:
 Originally Posted by kts1230 When calculating the mean and variance of the Lognormal and RSLN-2 models, should the mean and variance match exactly? Or just very close? I'm getting a mean and var for the lognormal of 1.008366 and .002711. And for the RSLN-2 I'm getting 1.008374 and .00265 Thanks
Hi,

When calculating the mean & variance for each model, you should do so on the log-returns, which are normally distributed. See post #386 in this thread for more details: http://www.actuarialoutpost.com/actu...ee#post5315745

I hope this helps!
__________________
ASA

FSA Requirements
Modules: Regulation & Taxation | Enterprise Risk Management | Financial Economics
Exams: Life Pricing | Life Finance and Valuation | Life Risk Management
Other: DMAC

Last edited by thegabesta; 11-13-2017 at 08:47 PM.. Reason: Fixed reference to post
#3
11-24-2017, 05:40 PM
 ACHOOOary SOA Join Date: Nov 2015 Posts: 7

I was told that there's a certain exercise / case study which does a great job at pointing you what needs to be done for Task 1. Any know which are helpful per say. Thanks!
#4
11-27-2017, 06:31 PM
 kts1230 SOA Join Date: May 2016 Posts: 21

Just wanted to say thanks for the help! Especially this link, that was what I needed!

http://www.actuarialoutpost.com/actu...ee#post5315745
#5
11-27-2017, 08:20 PM
 thegabesta Member SOA Join Date: Mar 2013 Posts: 148

Quote:
 Originally Posted by kts1230 Just wanted to say thanks for the help! Especially this link, that was what I needed! http://www.actuarialoutpost.com/actu...ee#post5315745
__________________
ASA

FSA Requirements
Modules: Regulation & Taxation | Enterprise Risk Management | Financial Economics
Exams: Life Pricing | Life Finance and Valuation | Life Risk Management
Other: DMAC