A
amsbam1
Member
When answering this question, it doesn't include the diversification benefit when calculating the risk margin. Do you know why this is?
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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.
B
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Can we assume that this answer is now out of date and that the answer should definitely include the SCR at t=0?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?
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?
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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.