ACTUARY Actuarial Models Flashcards
7 cards from real Actuary Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 ACTUARY Actuarial Models flashcards as text
Under the Cox-Ingersoll-Ross (CIR) model, which property ensures interest rates remain non-negative?
Answer: The condition 2αθ ≥ σ²
The Feller condition 2αθ ≥ σ² ensures the process never reaches zero, keeping rates non-negative.
In a select-and-ultimate mortality table, what does the 'select' period represent?
Answer: The initial period when recent underwriting affects mortality
The select period captures the effect of recent underwriting or selection, during which mortality differs from the population average.
A compound Poisson process has Poisson frequency λ and severity distribution F(x). What is the variance of aggregate losses?
Answer: λ·E[X²]
The variance of a compound Poisson process equals λ·E[X²], which combines frequency variance and second moment of severity.
Which interpolation method for fractional ages assumes a uniform distribution of deaths (UDD)?
Answer: Linear interpolation of l_x
Under UDD, the number of survivors l_{x+t} is linear in t between integer ages, implying a uniform distribution of deaths.
In the Black-Scholes framework, what is the risk-neutral drift of a non-dividend-paying stock?
Answer: The risk-free rate r
Under the risk-neutral measure, all assets earn the risk-free rate r, replacing the real-world drift μ.
For a fully continuous whole life insurance, which equation defines the net premium reserve at time t using the prospective method?
Answer: PV(future benefits) − PV(future premiums)
The prospective reserve equals the present value of future benefits minus the present value of future net premiums.
What does the 'credibility complement' represent in the Bühlmann credibility framework?
Answer: The grand mean used when credibility weight is zero
When the credibility weight Z equals zero, the estimate defaults entirely to the complement, which is the overall mean of the portfolio.