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Online course materials for MATH20962Contingencies 1 - Actuarial Science
Unit code: | MATH20962 |
Credit Rating: | 10 |
Unit level: | Level 2 |
Teaching period(s): | Semester 2 |
Offered by | School of Mathematics |
Available as a free choice unit?: | N |
Requisites
PrerequisiteAdditional Requirements
MATH20962 pre-requisitesFor students on the Actuarial Science and Mathematics programme only.
Aims
The unit aims to provide a mathematical introduction to models using cashflows which depend upon survival, death and other uncertain factors.
Overview
The course covers the first part of the material required in subject CT5 of the Actuarial Profession's examinations. Techniques and concepts developed in MATH10951 & MATH20951 are extended to cover the case where the payments are uncertain in timing.
Learning outcomes
On successful completion of this module students will be able to
* Retain knowledge and demonstrate understanding of the topics in this course unit. In particular :
- Define simple assurance and annuity contracts, and develop formulae for the means and variances of the present values of the payments under these contracts, as well as derive premiums for them;
- be comfortable using actuarial notation;
- derive relationships between expected present values of different contracts;
- understand the concept of, and use, a life table and a select life table;
- calculate and demonstrate understanding of net and gross premium reserves, as well as death strain and mortality profit; and
- be able to apply concepts learnt in the course to other applications not necessarily involving payments dependent on whether a person is alive or not.
* Have the basic knowledge and a set of tools and methods that can be used
- in subsequent course units;
- (together with MATH39522) to gain exemption from the Actuarial Profession CT5 examination;
- in a career involving mathematical and/or actuarial topics.
Assessment methods
- Other - 20%
- Written exam - 80%
Assessment Further Information
Two short tests under examination conditions, each worth 10%.
Examination at end of semester 2, 2 hours duration, weighting 80%.
Syllabus
This unit explores some further simple financial topics from a mathematical point of view.
1. Revision of financial mathematics relevant to this course (compound interest) (1 lecture)
2. Revision of probability theory relevant to this course and general introduction to contingencies (1 lecture)
3. Introduction to mortality models : random variables Tx and Kx and their properties ,the probabilities of survival or death, actuarial notation, the life table, approximations for non-integer ages and select mortality (5 lectures)
4. Assurances (generally these are insurance policies that make a payment when a person dies) : explanation of what they are and the different types (whole of life, term, endowment, deferred and increasing and also depending on the precise timing of the payment made), placing a value on these policies (Expected Present Value(EPV)), calculating the present value of the underlying random variable and also the variance.(3 lectures)
5. Annuities (generally an insurance policy that makes a series of regular payments if a person remains alive): explanation of what they are and the different types (whole of life, term, deferred and increasing and also depending on the precise timing of the payments), placing a value on these policies (Expected Present Value), calculating the present value of the underlying random variable and also the variance. Certain important approximations are also covered.(4 lectures)
6. Explanation of the Principle of Equivalence and the calculation of net premiums. Explanation of concept of Net Loss with examples and also how it might be used to calculate premiums.(2 lectures)
7. Expenses of an insurance company and the calculation of Gross Premiums. Explanation of with profits policies and the application of bonus (a means to increase the payment made by the policy). Calculation of the related EPV's and premiums.(2 lectures)
8. Introduction to reserving and the calculation of retrospective and prospective reserves on a net premium and gross premium basis. The recursive formula that links reserves from one year to the next.(3 lectures)
9. Death strain at risk and Mortality profit.(1 lecture).
The course will be supported by the use of the software R to provide a deeper understanding and also to perform calculations.
Recommended reading
- Core Reading : Subject CT5, Contingencies. Produced by the Actuarial Profession.
- D.C.M. Dickson, M.R. Hardy and H.R. Waters, Actuarial Mathematics for Life Contingencies.
- NL Bowers, Actuarial Mathematics, HU Gerber and JC Hickman, Society of Actuaries, 1997
Feedback methods
Feedback tutorials will provide an opportunity for students' work to be discussed and provide feedback on their understanding. Coursework or in-class tests (where applicable) also provide an opportunity for students to receive feedback. Students can also get feedback on their understanding directly from the lecturer, for example during the lecturer's office hour..
One Tutorial a week will be held in the computer cluster when the use of R can be practised.
Study hours
- Lectures - 22 hours
- Tutorials - 22 hours
- Independent study hours - 56 hours
Teaching staff
Jonathan Ferns - Unit coordinator