Actuarial Outpost > SoA ERM EOM Task 6
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#1
03-15-2013, 05:02 PM
 actout89 CAS SOA Join Date: Jun 2012 Posts: 10

Figured I would open a thread for this as there doesn't seem to be a whole lot of discussion going on related to the new ERM EOM exercise.

Does anyone have any guidance as to how to complete the first 2 questions: calculating aggregate economic capital using both risk measures (CTE and VAR) + how to calculate the benefits of diversification?

It looks like the Milliman document from the module readings in section 8 has some helpful material in Section 8 'Illustrative Examples' but its not exactly an easy to follow guide.

Appreciate any thoughts anyone may have.

Thanks.
#2
03-16-2013, 12:50 PM
 actout89 CAS SOA Join Date: Jun 2012 Posts: 10

Nevermind - still learning first grade concepts like reading the question fully first.
For anyone that may have had the same problem as me, the question tells you the exact formula to use to calculate aggregate economic capital (its that square root term at the bottom of the page under T6.4).
#3
03-17-2013, 11:07 AM
 actout89 CAS SOA Join Date: Jun 2012 Posts: 10

FYI - Google this SOA paper for help with 6.5:
"Mortality Catastrophe Bonds as a Risk Mitigation Tool"
#4
11-09-2013, 03:06 AM
 ddcheng SOA Join Date: Apr 2013 Posts: 24

Hi there,

I know it's a long shot, but I still wanna ask if you have any advice on 6.3 which asks for our opinion on any deficit on this correlation matrix approach.
I can only think of one idea which can be solved by Copula method...and then I am out =.=

any comment is appreciated!!!

Last edited by ddcheng; 11-09-2013 at 03:35 AM..
#5
05-02-2014, 04:28 PM
 concactu Member SOA Join Date: Jul 2006 Location: NY Studying for FAC Posts: 174

I'm stuck on 6.3. Is the question asking for two issues with using a correlation matrix? I can only think of one - not accounting for tail dependence. What am i missing?
#6
05-05-2014, 11:47 AM
 MastaJ773 Member SOA AAA Join Date: Nov 2012 Posts: 313

Check the module where it discusses copulas and why they are used vs. standard correlational coefficients
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#7
05-05-2014, 05:09 PM
 concactu Member SOA Join Date: Jul 2006 Location: NY Studying for FAC Posts: 174

Yes, but that's all related to the tail dependence - the reason we use copulas. I'm looking for a second issue. Anyways, I put something down.
#8
07-06-2014, 12:11 PM
 UKbound Member SOA Join Date: Jul 2012 Favorite beer: Captain Morgan Posts: 153

I'm really struggling with this one task, anyway someone would be so kind and PM me. I can't wrap my head around how to complete that task 6 worksheet. Not looking for someone to hand me answers - but some guidance.

I'm will to brainstorm with anyone else on this paper and share my thoughts if they have issues with others task.
#9
07-06-2014, 04:26 PM
 UKbound Member SOA Join Date: Jul 2012 Favorite beer: Captain Morgan Posts: 153

I figured it out....needed to get away from it a bit, then came back to it and it now makes sense...
#10
07-22-2014, 10:43 AM
 driwaki Member SOA Join Date: Nov 2013 Studying for FA Posts: 31

How do I calculate the Diversification Benefit? Is it the total minus Aggregate EC?