Preview Questions Actuary | Role Specific Skill

Question 1: How do you model "Early Retirement" assumptions in pension plan pricing, and what impact does early retirement have on the financial stability of pension plans?

Which action should you take?

Choose only one option

Early retirement should be assumed to never occur in pension plans

Early retirement assumptions are modeled by estimating the probability of early retirements and adjusting benefit payments accordingly, which affects plan funding requirements

Early retirement only applies to certain pension products, not to all plans

Early retirement assumptions are irrelevant and should be ignored

Question 2: What is the primary purpose of using credibility theory in insurance pricing?

Which action should you take?

Choose only one option

To predict future mortality rates

To adjust premiums based on claims frequency

To adjust premiums based on policyholder demographics

To balance historical data with external data sources

Question 3: What is the significance of "Asset Correlation" in insurance financial models, and how do you estimate the correlation between different asset classes in risk assessment?

Which action should you take?

Choose only one option

Asset correlation is irrelevant in insurance as risks are independent

Asset correlation can be ignored if the insurer is diversified

Asset correlation only applies to market risk, not insurance portfolios

Asset correlation measures the degree to which different assets move together, and it is estimated using historical data and Monte Carlo simulation to model portfolio risk

Question 4: When applying a Monte Carlo Simulation for portfolio risk modeling, what is typically modeled?

Which action should you take?

Choose only one option

The correlation between interest rates and stock prices

The covariance between assets in the portfolio

Historical data to determine past portfolio performance

Random variables based on assumptions about underlying distributions

Question 5: Which technique is most appropriate for forecasting future insurance claims using a combination of time-series and regression analysis?

Which action should you take?

Choose only one option

Moving Average Convergence Divergence (MACD)

Exponential Smoothing

ARIMAX (AutoRegressive Integrated Moving Average with Exogenous Variables)

Generalized Least Squares (GLS)

Question 6: How do you estimate the tail risk of an asset using Monte Carlo simulations?

Which action should you take?

Choose only one option

By adjusting for inflation in the portfolio

By running a large number of simulations and analyzing the worst 1% of outcomes

By using historical data to compute volatility

By calculating the average value of the asset over time