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April 2016 Q1 (v)

Discussion in 'SA3' started by amsbam1, Jul 25, 2016.

  1. amsbam1

    amsbam1 Member

    When answering this question, it doesn't include the diversification benefit when calculating the risk margin. Do you know why this is?
     
    amsbam1, Jul 25, 2016
    #1
  2. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    See page 8 of the Examiners' Report, which implies marks would be given whether you include a diversification benefit or not, so long as you back it up with reasonable assumptions. The examiners themselves chose to ignore it.
     
    Katherine Young, Aug 1, 2016
    #2
  3. BenL

    BenL Member

    Can we assume that this answer is now out of date and that the answer should definitely include the SCR at t=0?

    Ie, the calc should now be of the form 6%*(435 + 213.2v^1 + 39.2 v^2 + 4.4v^3), where we make the assumption that the reserve values in year t, are at the beginning of that year ie the reserve of 100 is at t=0.

    The original answer also seems to omit the assumption that there is no run-off of the SCR from t=0 to t=1 in getting to the RM of 40.3. The SCR excluding avoidable market risk is 435 @t=0, but then that same value is used in the calculation at time 1 as though it is the projected value?
     
    Last edited by a moderator: Apr 3, 2019
    BenL, Apr 3, 2019
    #3
  4. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    I think that's a fair assumption. The original question could have been interpreted in different ways, so the examiners will have been lenient on any reasonable approach.
     
    Ian Senator, Apr 5, 2019
    #4

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