Description: discussion of risk management and proper pricing of life insurance products.

Description: This paper develops credibility using a longitudinal data framework. In a longitudinal data framework, one might encounter data from a cross-section of risk classes towns with a history of insurance claims available for each risk class. For the marginal claims distributions, we use generalized linear models, an extension of linear regression that also encompasses Weibull and Gamma regressions. Copulas are used to model the dependencies over time specifically, this paper is the first to propose using a t-copula in the context of generalized linear models. The t-copula is the copula associated with the multivariate t-distribution like univariate t-distributions, it seems especially suitable for empirical work. Moreover, we show that the t-copula gives rise to easily computable predictive distributions that we use to generate credibility predictors. Like Bayesian methods, our copula credibility prediction methods allow us to provide an entire distribution of predicted claims, not just a point prediction.

Description: In this paper we study the pricing of financial options and contingent claims. We show that two time-honored concepts in actuarial science - the Esscher transform and the adjustment coefficient - are efficient tools for pricing many options and derivative securities if the logarithms of the prices of the primitive securities are certain stochastic processes with stationary and independent increments. We also study the pricing of American options on two stocks without expiration date and with payoff functions which are homogeneous with respect to the two stock prices.

Description: In this paper,we present a method which first converges a two dimensional data to a univariate one and then uses the interval censoring technique to estimate the probability of failure of a Joint-life status from a heavily censored data. Our study shows that the life annuities of joint-life status calculated assuming independence overestimates the ones evaluated from an actual sample of population.

Description: By the use of resampling and extreme value statistics we will develop a method to reduce the time and costs of testing insurance company insolvency. Most ruin models require assumptions about the surplus distribution and/or assumptions about the claims count and severity distributions. The actuary may not be comfortable in making these ruin assumptions. Instead, he or she may generate such distributions by running extensive computer simulations of corporate models, I introduce a method to reduce the number of simulations necessary' to estimate the 1 and 0.1 percentiles of the surplus distribution. This approach 'cuts off' the tail at approximately the tenth percentile of the sample distribution and generates new tails for the distribution by resampling. Averages of the new order statistics approximate the I and 0.1 percentiles.

Description: The two-parameter Pareto distribution is a commonly used model in reliability and risk modeling. Minimum variance unbiased estimates of the parameters of Pareto distribution are not known. In this paper, we propose and investigate a method of estimation of the parameters of the Pareto distribution. This method is based on minimization of the Kolmogorov-Smirnov distance between the empirical cumulative distribution function [cdf] and the cdf of the Pareto distribution.

Description: Letter From The President column for the October/November 2012 edition of The Actuary magazine discussing the importance of actuaries staying relevant in today’s and the future’s work force.

Description: Investment Fallacies: The "Dollar Bill" Fallacy

Description: This article is dedicated to the non-statutory accounting treatment of common credit risk exposures of life insurers but does not cover all aspects of non-statutory accounting standards. It introduces the concept of and the valuation of credit risks, concerning life insurers.

Description: Asset cash flow modeling and asset assumptions are growing in importance with PBR especially considering the low interest rate environment. The Academy’s Life Practice Council and Life Valuation Committee have formed a Low Interest Rate Asset Adequacy Testing Task Force which has conducted an industry survey to raise awareness and summarize the actuarial best practices for financial reporting actuaries practicing in today’s very low interest rate environment. As the scrutiny on the asset side ratchets up, actuaries must consider how best to develop the asset assumptions as well as model the reinvestment and disinvestment strategies. Coherent assumptions and modeling practices across modeling exercises are expected while respecting the purpose of each calculation.