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April 2014 Q6 (ii)

J

jane_smith

Member
Hello

Question: All inputs to the model and assumptions used have been checked and were found to be reasonable and loaded correctly into the model. Outline the other checks that should be performed to ensure that the results from the pricing model are correct.

One of the sub header asset solutions is checks against the projection examples given are
- Claim inception
- Lapses
- Expense and expense inflation

I would have thought these are assumptions which already been checked? Are there not assumptions?
What is the difference between assumptions and projections?

Thanks
 
Hi,

You're right that the items in the list are assumptions and so they have already been checked, however we're now checking that the outputs of the profit test really do reflect the inputs.

So even if the assumption is correct, the model might be using them incorrectly.

I hope that helps!

Anna
 
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