CP2 - General exam questions

[Trevor]

Hi,

I have been practicing the CP2 past papers and have these questions always bugging me:

Most of these are relating to the 2016 September paper 2 exam:
General document layout:
1. Page count
There is always a suggestion on how many pages the summary needs to be, for example, 5 to 7 pages.
Is this a strict requirement? I find this more of a grey area. we can easily shrink the font size (perhaps 10), or simply stretch the page margins all the way to the edge of the paper to make sure it is within 7 pages. Is this allowed?
I've been doing silly things like fitting two charts side by side on the same row, for the sake of staying within 7 pages.

2. Page breaks
Page break is a very neat way of organising a document, by not mixing multiple sections of a document within one page.
However doing this wastes a lot of blank spaces, and could easily exceed 7 pages. I've been shrinking charts to fit the blank space at the bottom half of the page, but leaving the commentaries on the next page. This isn't a neat way to write a document, but I am doing it to fit within the page limit.
Is this really necessary? I might exceed the page limit, but in return for a very neat summary document.

3. MS Word features
Will we be assessed on how well we utilize the built-in features in MS Word? For example making use of the numbering/bullets.
At times I will do things manually such as using soft breaks to organise the spacing at specific parts of the document. There may be MS Word features available for this which I am not aware of, but will I be penalized for not using it?

4. English spellings
I have no issue writing up a document in English, but the grey area is the mix between American and British English. A few common examples are Color/Colour or Organize/Organise.
I assume it is British English is preferred. However my document is always in US spell check, it doesn't look good with all the false positive spelling errors flagged (flagging British spelling as a mistake). I am aware that we can change the settings, however it gets reverted to the US spelling every time.
Is it actually acceptable if there are some spelling slips or inconsistency mixing the American and British spelling?

5. Mathematical formulae
Occasionally in the summary, we will use some mathematical formula to simplify words.
Do we need to use the "Equation" feature in MS Word to produce this nicely, or it is sufficient to type them in pure text?
eg: write FV_(t-1) instead of FVt-1
It takes me some time to properly format the formulae.




For exam scoring, I have a few questions:
1. Under the "Objective" section of the summary or Audit trail, are we required to set a background on what is going on?
Some Examiner reports set the background before mentioning the purpose of the model. I learnt from that, however the recent papers I attempted didn't set it.
For example in the September 2016 paper 2, I wrote a few sentence saying what the company is planning to do, what are the concerns, before finally mentioning the purpose of the model.

2. Data or Non-Data checks
For paper 1 modelling, I understand it is extremely crucial, and marks are awarded for data and non-data (eyeball) checks.
However for paper 2 summary, is this actually required?
I actually spent time thinking very hard what are the possible checks I can show, and then explained it in the summary. However it turns out that no mark is awarded, neither the specimen solution mentioned any checks. Except saying "The result is expected because...."

It is obviously better to stay on the safe side to write down everything, but it is not easily done under time pressure.

3. Order of sections.
I understand the general rule is there should be a reasonable order of the document, such that it follows smoothly without jumping here and there.
However this brings me to a debate if there are any flexibility.
Taking the September 2016 Paper 2 as an example, we were asked to explain how we:

• Calculate the mortgage payments, and create a chart for it
• Calculate the split between interest and capital repayment, show it in a chart
• Produce a loan schedule, and then show the progression in a chart

The way I do it is insert the chart, with my commentary after explaining each section. I explained the result within the section immediately after talking about how I did it.
However though, the specimen solution clumps all the methodology together, and then all the results in another section.
I find it though as a reader, my approach may be more sensible. We look at the results immediately after doing it.
Is there actually a strict rule how we should lay it out?


I apologise for this really long thread, these are questions bottled for a long time.
Please give me some advice.

Thanks,
Trevor

 

[ntickner]

Some good questions here!

1. The page count is a guide. Don't stress about it. You'll only get penalised if the examiner thinks 'oh wow, this is way shorter than expected' (in which case you're going to be losing marks because you haven't put everything in), or 'gosh, this guy goes on a bit'. The latter case is only a problem if you're putting stuff in that doesn't add value or isn't asked for. Like loads of extra charts, or repeated explanations about similar things in two or more charts. Don't go making things harder to read to fit the page count.

2. See point 1. Don't stress - just do what you would want to see as a reader of the document.

3. Again, don't stress. The examiner only sees a screen shot of your document, not the MS Word file itself. So they're not going to be able to identify what features you have / haven't used. Clear communication is the key - so as long as your formatting doesn't distract from the message, but helps to make things easy to follow, you've nailed it.

4. Not a problem. We get loads of papers from all over the world, and don't have an issue with American spelling or minor grammatical differences.

5. As for point 3 - clarity is key. I don't think any examiner would have a problem with your alternative notation provided it reads clearly and is consistent throughout (e.g. don't use F(t-1) and F_(t-1) interchangeably)

Summary:
1. Objective - this should give a brief into & outline of what's being dealt with. My rule of thumb is three sentences & three bullet points. That should be enough to introduce the situation & give a line about each scenario.
2. Data checks - There should be a brief comment about what has been done to check the data. But this should be a paraphrase of what you already have in the audit trail for paper 2. You shouldn't have to go and check the data any further.
3. There's flexibility in how things are presented, but it needs to flow & make sense. I certainly wouldn't have an issue with how you've described things above.
But... there is benefit to following the herd in some cases - if the examiner sees exactly what he's expecting to see, it'll make his life just a little bit easier. The marking schedule is set up in Method description, Commentary, next steps. So if you make him/her go back and forth between sections, there's a chance he might miss something.

Hope that makes sense?

 

[Trevor]

Hi ntickner,

Thanks for your feedback, that is very very helpful!
However I want to follow up on item 2 of the summary. Is this actually required? Do I lose mark if I don't mention any data checks at all?
If it is required, did you mean I can rewrite (not copy-paste) what the audit trail has already mentioned? So I don't have to get out of the way to do any trivial checks just for the sake of it.

 

[ntickner]

There are 2 marks for describing the data in the summary - this covers what data is provided, the source, and whether it's been checked. You'll lose half to one mark for missing out on the checks bit, depending on how much there is to say about it.
It's typically not expected that you need to do additional checks on top of what has already been done thus far in the model (I say typically because up to now the examiners haven't given a Paper 2 question that involves additional data being provided as part of the extra modelling step, and I wouldn't expect them to). So yes - give a brief explanation of what checks were done by the student you took over from.

The general principle here is to remember your audience - the actuary you're writing for needs to know what data you used to get your results, and that it's reasonable.

 

[Trevor]

Thanks ntickner, that is helpful.
I just attempted the 2016 May papers and sparked some additional question, I will just continue asking here if it is okay.

Paper 1:
1. Technical knowledge.
Are we expected to remember all the technical knowledge in the CT papers? I assume the CP2 paper is mainly to test our Excel modelling skills, rather than testing if we recall other technical knowledge. If they are needed, there will be an additional information provided to refresh us.
However in the CA2 May 2016 paper, it requires simulating Random variables of a specific distribution, using the uniform distribution, also application of the statistical Chi-Square test.
When attempting it (under exam conditions), I barely recalled the simulation process, but failed to recall the Chi-square test. My instinct is telling me that I am over-complicating it because this is a modelling paper, not a statistic exam paper, so I really didn't know what to do.
Can I confirm that this is not relevant anymore in the most recent CP2 exam format? ie: any technical knowledge required will be provided.

2. Commentaries on results
We are almost always asked to produce charts to illustrate the results. Do we need to comment / analyse them like in paper 2 summary?
I am aware that we need at least some comment to show that our eye-ball checks are okay.


Paper 2:
1. Document style
I remember reading from one of the earlier examiner reports saying when explaining the modelling approach, we shouldn't include "hardcoded" numbers or parameters related to the data input, it should be a descriptive summary of what has been done. eg:
we should say: "The cashflow projection involves a daily fixed cost, as outlined in the data given"
we should not say: "A daily fixed cost of £150 is applied each day on the projection"

However the sample solution for the CA2 May 2016 paper seems to use the latter. Is there actually a strict rule on this?

 

[Trevor]

Hi,

I have additional questions to ask too. In paper 2 "Next Steps" section, will we be awarded marks if we give business suggestions rather than modelling ones?

For example in the 2016 May paper 2, it suggests alternative methods to deliver the goods (wool/felt sheets). This doesn't suggest how the model can be improved, it is instead a business suggestion to make more profit.

 

[ntickner]

Paper 1
1. Technical knowledge. Generally, any specialist knowledge expected will usually be explained pretty well and additional guidance will be provided. While you no longer have to have passed all the CTs to write CP2, it's still recommended. But you shouldn't have to try retain it all, and you can easily google something if you need to.
The specific example of Chi-squared testing is one where I'd suggest doing a few examples beforehand. It comes up a lot. It's almost always optional - you'll get a couple of marks for it if you do it, but won't lose too many if you don't. But if you're able to rattle one off in under 5 minutes, it's well worth it.

2. Commentary on results - you're expected to come up with 'reasonableness checks'. These are similar, but subtly different to the commentary in paper 2. You should be able to explain why the shape, or direction, or features of a graph make sense, and show that the calculation is correct. This applies to all calculated results - not just charts. The focus is on showing that your model is working, while the paper 2 focus is on explaining the implications of the results.

Paper 2
I think either style is fine, but I'd tend towards the higher-level style not including actual details. As mentioned before, keep your audience in mind - the senior actuary is looking for a summary-level walkthrough of what was done to get the results. He's more interested in methodology than the details of exactly what each input is.

Next steps: I'd start with model-related suggestions. If you have time, or run out of those, move on to business-related. You should get marks for the business related suggestions which have an impact on the model, or at least, have an impact on the decision that the model is trying to feed into. Actually, most suggestions that show that you understand the situation and have thought about a reasonable direction of travel for the analysis will earn something, even if it's not on the mark schedule.