1. 

   Actuary@22 Very Active Member

   Hi
   
   Pls explain part v) of Q 7 from the Ifoa CT4 Sept 2012 paper.I didnt understand why the expression P(Tl >t )<0.5 is being used here.

    

   Actuary@22, Aug 9, 2021

   #1
2. 

   Dave Johnson ActEd Tutor Staff Member

   Hi
   
   The Examiners' Report misses a step here, which is to note that the probability of experiencing a period of high volatility over a period having started in the low state is equal to one minus the probability of staying in the low state throughout.
   
   Does that help?
   
   Dave

    

   Dave Johnson, Aug 17, 2021

   #2

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