Preview Questions Actuary | Role Specific Skill

Question 1: What is "Dynamic Pricing," and how do you apply it in insurance product pricing to reflect market conditions, competition, and customer behavior?

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Dynamic pricing is irrelevant and should not be used in the insurance industry

Dynamic pricing complicates pricing models and should be avoided

Dynamic pricing adjusts premiums in real-time based on external factors such as competition, claims data, and customer behavior

Dynamic pricing is only applicable to auto insurance, not life insurance

Question 2: What is the primary advantage of using a Bayesian framework in financial forecasting for actuaries?

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It incorporates prior information and updates with new data

It allows for deterministic predictions

It requires fewer data points

It eliminates the need for scenario analysis

Question 3: What is the main advantage of using Generalized Linear Models (GLM) over traditional linear regression in actuarial pricing models?

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GLM works faster with smaller datasets

GLM can handle non-normal distributions of the dependent variable

GLM is easier to interpret for non-actuaries

GLM only requires a linear relationship between variables

Question 4: What is the hazard function in survival analysis used to estimate in actuarial modeling?

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The instantaneous rate of occurrence of an event at a particular time point

The average duration of time before an event occurs

The cumulative probability of an event occurring over time

The probability of survival past a certain point

Question 5: How does "Risk-Adjusted Return on Capital" (RAROC) assist in evaluating the profitability of insurance products, and what are the key inputs required for accurate calculations?

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RAROC focuses solely on short-term profitability, not long-term sustainability

RAROC is only useful in banking, not insurance products

RAROC compares the risk-adjusted return to capital required, with key inputs including risk-weighted assets, return on equity, and capital charges

RAROC is irrelevant in financial modeling and should be replaced with traditional profitability metrics

Question 6: In actuarial financial forecasting, what is typically used to model catastrophic events and their impact on reserves?

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Linear regression

Poisson distribution

Normal distribution

Extreme value theory (EVT)