Hi all,
I would appreciate help with the following;-
Queston 4 (v);-
I don't understand the examiners' points below from the solution;-
While I am happy with this comment, I don't understand why the examiners speak about "AUTO" - correlation. Isn't it just correlation? How can you have auto-correlation between diff time series? Isn't Autocorrelation the
correlation of a signal with itself?
Please also confirm if my understanding is correct i.e that the examiners are referring to say modelling the spread using Cholesky and the added normality
assumption of the spread. Ofocurse if the above is correlation and not "auto"-correlation.
Question 5 (i);-
I assume the 20% chance of unexpected loss under underwriting risk is just a thumb suck and is unrelated to the mean loss and the maximum loss derived before i.e 77 million and 168 million. This is a reasonable estimate, however I have no clue how the examiners arrived at their 91 million pounds loss. Was it just a thumb suck or could it have been estimated using some figures. With the rest of the risks following it is clear whether the examiners are thumb sucking or estimating. Some help will be appreciated as always.
Last edited by a moderator: Sep 18, 2014