Difference between revisions of "2016.Fall Q15 Redone"
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| − | This calculation is the same as explained on [ | + | This calculation is the same as explained on ''[[CIA.PrLiabs#2016.Fall_.2315_Redone | PrLiabs]]'' but with numbers from [https://www.battleactsmain.ca/pdf/Exam_(2016_2-Fall)/(2016_2-Fall)_(15).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2016.Fall #15)'''</span> |
:{| class='wikitable' style='text-align: center' | :{| class='wikitable' style='text-align: center' | ||
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Then the '''final value''' for the capital required for interest rate risk is: | Then the '''final value''' for the capital required for interest rate risk is: | ||
| − | : [ 49,000 x 2.367 x 1.25% ] - [ 35,102 x <span style="color: green;">1.0822</span> x 1.25% ] = <u> | + | : [ 49,000 x 2.367 x 1.25% ] - [ 35,102 x <span style="color: green;">1.0822</span> x 1.25% ] = <u>975</u> |
'''Something that makes my brain itchy''': | '''Something that makes my brain itchy''': | ||
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: Why do they keep using the term (0.5 - 1/3)? Isn't this just 1/6? I suppose I do see why they do it – it makes the reasoning behind the adjustment for future accident date clearer ''(kind of)''. Anyway, it's a small point. Ok, I feel better now that I've scratched my brain. | : Why do they keep using the term (0.5 - 1/3)? Isn't this just 1/6? I suppose I do see why they do it – it makes the reasoning behind the adjustment for future accident date clearer ''(kind of)''. Anyway, it's a small point. Ok, I feel better now that I've scratched my brain. | ||
| − | Back to [ | + | Back to ''[[CIA.PrLiabs#2016.Fall_.2315_Redone | PrLiabs]]'' |
Latest revision as of 15:38, 18 June 2020
This calculation is the same as explained on PrLiabs but with numbers from E (2016.Fall #15)
APD CumPd IncrPd setup for PVfctr setup for PVfctr w/ MfAD (2) (3) (4) (6) = (4) / 1.02^(2) (9) = (4) / 1.015^(2) 0.5 10% 10% 9.90% 9.93% 1.5 60% 50% 48.54% 48.90% 2.5 100% 40% 38.07% 38.54% (10) Total = 0.9651 (10) Total = 0.9737
PV factors:
- PVfctr @ 2.0% = 0.9651 x (1.02)(0.5 - 1/3) = 0.9683
- PVfctr @ 1.5% = 0.9737 x (1.015)(0.5 - 1/3) = 0.9760
Macaulay duration:
- Step 1: Take the SUMPRODUCT of columns (2) and (6) DIVIDED by the SUM of column (6) to get 1.7919 (This is the same method as for claim liabilities.)
- (It's the weighted average of the time from column (2) where the weights are the PV factors from column (6))
- Step 2: This is an extra step in the duration calculation for the premium liabilities to adjust for the FAD (Future Accident Date). It's easy, just subtract (0.5 - 0.3333):
- The final Macaulay duration is:
- 1.7919 - (0.5 - .3333) = 1.6252
- The final Macaulay duration is:
- And the modified duration is:
- 1.6252 / (1.02) = 1.5933
- And the modified duration is:
To finish solving the problem as in the examiner's report but with this new duration, you have to recalc the duration of the total liabilities (claims + premium):
- duration of liability = ( 24,350 x 0.8565 + 10,752 x 1.5933 ) / ( 24,350 + 10,752 ) = 1.0822
Then the final value for the capital required for interest rate risk is:
- [ 49,000 x 2.367 x 1.25% ] - [ 35,102 x 1.0822 x 1.25% ] = 975
Something that makes my brain itchy:
- Why do they keep using the term (0.5 - 1/3)? Isn't this just 1/6? I suppose I do see why they do it – it makes the reasoning behind the adjustment for future accident date clearer (kind of). Anyway, it's a small point. Ok, I feel better now that I've scratched my brain.
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