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#181
05-10-2011, 01:42 PM
 blahbla Member Join Date: May 2008 Posts: 1,408

Quote:
 Originally Posted by elmo What i believe i got is 10% and 6.8% Income = premium - expenses - ACTUAL reserves which is 200000*.75 - 125000 = 25000. capital based on feldblum yields for part a -- 249392.7 and for part b --366666.67
I'm sorry, but in now way did you answer the question correctly except for coming up with the capital amounts. I'd count on .25 points for A & B for a total of .50 points.
#182
05-10-2011, 01:51 PM
 Streetlight 22 Member CAS Join Date: Nov 2009 College: UF Alumni Posts: 1,134

Quote:
 Originally Posted by elmo What i believe i got is 10% and 6.8% Income = premium - expenses - ACTUAL reserves which is 200000*.75 - 125000 = 25000. capital based on feldblum yields for part a -- 249392.7 and for part b --366666.67
Income has nothing to do with actual reserves. Reserves can be on the books for years. Income has to do with what was INCURRED that year.
#183
05-10-2011, 01:55 PM
 elmo Member Join Date: Sep 2005 Posts: 394

Regerding raroc - for capital allocation you use the ELR but for rate of return since its after-the-fact you use actual reserves not ELR so we can debate until the cows come home whether this is raroc or not and we wont know until the people that fail get their point distributions but if it's raroc then this is the correct answer.
#184
05-10-2011, 01:56 PM
 elmo Member Join Date: Sep 2005 Posts: 394

Quote:
 Originally Posted by Streetlight 22 Income has nothing to do with actual reserves. Reserves can be on the books for years. Income has to do with what was INCURRED that year.
I would say the the incurred loss is the reserves. I think its fair to assume that that's the case
#185
05-10-2011, 01:57 PM
 Dash. Member Join Date: May 2007 Studying for nothing =) Favorite beer: Sam Adams Posts: 627

Quote:
 Originally Posted by elmo Regerding raroc - for capital allocation you use the ELR but for rate of return since its after-the-fact you use actual reserves not ELR so we can debate until the cows come home whether this is raroc or not and we wont know until the people that fail get their point distributions but if it's raroc then this is the correct answer.
It can't be quite the right answer because the problem stated that reserves included UEPR. I did it a RAROC approach too, as opposed to calculating equity flows for IRR; but I think it's more likely that the IRR approach is what the problem writer was going for...
#186
05-10-2011, 01:59 PM
 MountainHawk Member CAS AAA Join Date: Dec 2001 Location: Salem, MA Studying for Nothing!!!! College: Lehigh University Alum Favorite beer: Yuengling Posts: 55,668

Quote:
 Originally Posted by elmo Regerding raroc - for capital allocation you use the ELR but for rate of return since its after-the-fact you use actual reserves not ELR so we can debate until the cows come home whether this is raroc or not and we wont know until the people that fail get their point distributions but if it's raroc then this is the correct answer.
I disagree with this. The reserves were stated to include UEPR, so they have some expenses in them.

I'm completely convinced that they were looking for {(1-ELR-Expense Ratio)/Allocated Capital}. The full IRR methodology requires the exact timing of payments.
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#187
05-10-2011, 02:01 PM
 earl Member Join Date: Feb 2006 Posts: 714

Quote:
 Originally Posted by MountainHawk I disagree with this. The reserves were stated to include UEPR, so they have some expenses in them. I'm completely convinced that they were looking for {(1-ELR-Expense Ratio)/Allocated Capital}. The full IRR methodology requires the exact timing of payments.
The real question is when they say RAROC is wrong, can we find anything in the syllabus to base our appeal on?
#188
05-10-2011, 02:04 PM
 MountainHawk Member CAS AAA Join Date: Dec 2001 Location: Salem, MA Studying for Nothing!!!! College: Lehigh University Alum Favorite beer: Yuengling Posts: 55,668

The more I think about this, the more I think the question is probably defective. They ask for an IRR, but don't give you enough information to calculate it, they show loss + ULAE reserves that are dramatically below the steady state loss reserves of Premium * ELR * Avg Time to Payment.
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"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit. We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men." -- Woodrow Wilson

It doesn't matter who you vote for, the government always gets in. -- Elizabeth May

???? Jan 20: Freedom for the Bill of Rights

1 2
#189
05-10-2011, 02:06 PM
 blue_bomber Member CAS Join Date: Jan 2009 Location: Dr. Light's Lab Posts: 578

Quote:
 Originally Posted by earl The real question is when they say RAROC is wrong, can we find anything in the syllabus to base our appeal on?
I'm assuming there will be a fair amount of people appealing this question, is this a fair statement? I was debating whether or not.
#190
05-10-2011, 02:08 PM
 MyKenk Note Contributor Join Date: Nov 2005 Location: http://mhenk.blogspot.com Studying for CAS 9/8/whatever? College: Drake '06 Posts: 8,519

I never appeal anything.
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