Hi everyone,
I have a few small questions. Please could forum members and tutors help
Q1) I understand the theory of risk budgeting. Please could someone give a few real life examples of where its used. It all seems too theoretical to me at this point.
Q2) Please let me know if the below are correct. Please correct them is they are not.
"Cost of Capital" is the cost of borrowing for a company. Is it also the opportunity cost of say using the capital for one project and not another?
"New Business Strain" is the reserving amount for a newly sold product. As the premiums for the product come into the company, the new business strain reduces as the reserves required for the product payout are recouped. "Expenses to set up a policy" is not the new business strain.
"Capital Strain". I am not sure what this is?
Q3) I think a company's profit or a pensions surplus is the "assets - liabilities". I'm not sure how these "assets" and "liabilities" are calculated. Are they a present value, having discounted their future cashflows? or is it just the current "asset" and "liability" value.
Q4) In an exam question, should I consider that "building a model" is different to "Designing a model". Building a model is building it from the ground up whereas for designing a model I would use "scarcer files".
Q5) I have done an exam question on a policy that has no underwriting and a maximum premium. If a policy has no underwriting and a guaranteed maximum premium does this mean all policyholders are charged this maximum premium or otherwise?
Q6) The "Discuss" command verb. Some exam model solutions give pros and cons in a discuss question. In other cases they just give only pros or cons. I'm slightly confused on whether I should always give pros and cons to a "discuss" question - don't want to waste time listing (say) cons if there are no marks for it.
Thank you
I have a few small questions. Please could forum members and tutors help
Q1) I understand the theory of risk budgeting. Please could someone give a few real life examples of where its used. It all seems too theoretical to me at this point.
Q2) Please let me know if the below are correct. Please correct them is they are not.
"Cost of Capital" is the cost of borrowing for a company. Is it also the opportunity cost of say using the capital for one project and not another?
"New Business Strain" is the reserving amount for a newly sold product. As the premiums for the product come into the company, the new business strain reduces as the reserves required for the product payout are recouped. "Expenses to set up a policy" is not the new business strain.
"Capital Strain". I am not sure what this is?
Q3) I think a company's profit or a pensions surplus is the "assets - liabilities". I'm not sure how these "assets" and "liabilities" are calculated. Are they a present value, having discounted their future cashflows? or is it just the current "asset" and "liability" value.
Q4) In an exam question, should I consider that "building a model" is different to "Designing a model". Building a model is building it from the ground up whereas for designing a model I would use "scarcer files".
Q5) I have done an exam question on a policy that has no underwriting and a maximum premium. If a policy has no underwriting and a guaranteed maximum premium does this mean all policyholders are charged this maximum premium or otherwise?
Q6) The "Discuss" command verb. Some exam model solutions give pros and cons in a discuss question. In other cases they just give only pros or cons. I'm slightly confused on whether I should always give pros and cons to a "discuss" question - don't want to waste time listing (say) cons if there are no marks for it.
Thank you