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Assumptions ideas

R

rlsrachaellouisesmith

Ton up Member
Hi

On page 29 of the online classroom handout under Parameters there are two points:
Comment on any independence/dependencies in parameters
Comment on any minimums/maximums in the model

Can you give any examples of what these could be as I am not sure I have come across a situation where these would be appropriate/make sense?

Thank you,

Rachael
 
Good morning,

Further to this question I wondered approximately how many assumptions we should be 'aiming for' in the Audit trail. I appreciate we want to write down all assumptions we have made, but the question is more about how many we are expected to think of.

I was doing paper 1 from April 2020 and managed to come up with 10, is that enough, should I be thinking of more 'adding value' assumptions?

Guidance for next steps is 10-15, I wondered if there was similar guidance for the assumptions in the audit trail?

Thank you,

Rachael
 
Independence of parameters could be something like, 'the investment return and lapse rates rate are independent' (if we are not modelling any relationship between them). Min/max comment could be, 'the maximum term modelled is 20 years'. Just be careful not to restate parameters here and focus on assumptions that have been made when building the model. These comments won't always be relevant, so the ideas are not intended to be used for every situation. You must ensure they are tailored to the situation

The question should show the marks available for assumptions, aim for 1 good added value assumption per mark. So, 5 marks, 5 good assumptions. If you can come up with 10 good assumptions quickly that's great!

Sarah
 
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