Should MFE include DM chapter 18

[sohpmalvin]

When I started preparing for exam C, this was the first chapter I studied. I was stunned. These should be known as basics before going on to Brownian Motion. It helped me so much in understanding BM. Why don't SOA just include this chapter in MFE...?

[Hawkeye16]

I don't know if the SOA knows what they want to do with Exam MFE yet... They are still working out the kinks.

[bjz99]

Originally Posted by sohpmalvin

When I started preparing for exam C, this was the first chapter I studied. I was stunned. These should be known as basics before going on to Brownian Motion. It helped me so much in understanding BM. Why don't SOA just include this chapter in MFE...?

I'm curious to know what you learned from Chapter 18? I just picked it up and browsed through it for five minutes, and it's all stuff I learned for and from Exam P or stats classes.

[sohpmalvin]

Originally Posted by bjz99

I'm curious to know what you learned from Chapter 18? I just picked it up and browsed through it for five minutes, and it's all stuff I learned for and from Exam P or stats classes.

At least that chapter shows me how to derive black scholes formula from geometric brownian motion (pg 599). Frankly, I didn't know this when I took MFE!

Perhaps you are right, but I didn't complete any prob and stat class when I took P and MFE. Plus, P doesn't emphasize much on lognormal distribution, does it?

[Howard Mahler]

When I teach 3F/MFE I cover some of what is in Chapter 18.
(Of course I cover all of Chapter 18 when I teach Exam 4/C.)

The logic of the CAS/SOA syllabus committee seems to that Chapter 18 is better fit for Exam 4/C, since it involves the LogNormal Distribution, which is specifically already covered in detail on Exam 4/C. By using concepts like Limited Expected Values, it is relatively easy to discuss many of the results in Chapter 18 of McDonald.

Sections 18.1 to 18.4 would fit on either exam.
Section 18.5 overlaps to some extent with material already on Exam 3F/MFE, in Section 11.4 of McDonald. It would fit on either exam.
Section 18.6 is definitely a better fit on Exam 4/C.