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CT5_Syllabus for 2011

CT5_Syllabus for 2011

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Published by: Sunil Pillai on Apr 01, 2011
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Subject CT5ContingenciesCore TechnicalSyllabus
for the 2011 Examinations
1 June 2010
The Faculty of Actuaries andInstitute of Actuaries
 
 
Subject CT5 — Contingencies Core Technical Syllabus
Page 2
Aim
The aim of the Contingencies subject is to provide a grounding in the mathematical techniques whichcan be used to model and value cashflows dependent on death, survival, or other uncertain risks.
Links to other subjects
Subjects CT1 — Financial Mathematics, CT3 — Probability and Mathematical Statistics andCT4 — Models: introduce techniques that will be drawn upon and used in the development of thissubject.Subject ST2 — Life Insurance Specialist Technical: uses the principles and techniques in this subjectto help in the solution of life insurance problems.
Objectives
On completion of this subject the candidate will be able to:(i) Define simple assurance and annuity contracts, and develop formulae for the means andvariances of the present values of the payments under these contracts, assuming constantdeterministic interest.1. Define the following terms:
 
whole life assurance
 
term assurance
 
pure endowment
 
endowment assurance
 
critical illness assurance
 
whole life level annuity
 
temporary level annuity
 
premium
 
benefitincluding assurance and annuity contracts where the benefits are deferred.2. Define the following probabilities:
n
|
m
q
x
,
n|
q
x
and their select equivalents
n
|
m
q
[
x
]+
,
n
|
q
[
x
]+
.
 
Subject CT5 — Contingencies Core Technical Syllabus
Page 3
3. Obtain expressions in the form of sums for the mean and variance of the present valueof benefit payments under each contract above, in terms of the curtate random futurelifetime, assuming that death benefits are payable at the end of the year of death andthat annuities are paid annually in advance or in arrear, and, where appropriate, simplifythese expressions into a form suitable for evaluation by table look-up or other means.4. Obtain expressions in the form of integrals for the mean and variance of the presentvalue of benefit payments under each contract above, in terms of the random futurelifetime, assuming that death benefits are payable at the moment of death and thatannuities are paid continuously, and, where appropriate, simplify these expressions intoa form suitable for evaluation by table look-up or other means.5. Extend the techniques of 3. and 4. above to deal with the possibility that premiums arepayable more frequently than annually and that benefits may be payable annually ormore frequently than annually.6. Define the symbols
A
x
,
:
x n
A
,
1:
x n
A
,
1:
x n
A
,
a
x
,
:
x n
a
,
:
x nm
a
,
x
a

,
:
x n
a

,
:
mx n
a

andtheir select and continuous equivalents. Extend the annuity factors to allow for thepossibility that payments are more frequent than annual but less frequent thancontinuous.7. Derive relations between annuities payable in advance and in arrear, and betweentemporary, deferred and whole life annuities.8. Derive the relations
A
x
= 1
 
x
da

,
:
x n
A
= 1
 
:
x n
da

, and their select and continuousequivalents.9. Define the expected accumulation of the benefits in 1., and obtain expressions for themcorresponding to the expected present values in 3., 4., and 5. (note: expected valuesonly).(ii) Describe practical methods of evaluating expected values and variances of the simplecontracts defined in objective (i).1. Describe the life table functions
l
x
 and
x
 
and their select equivalents
l
[
x
]+
and
[
x
]+
.
 2. Express the following life table probabilities in terms of the functions in 1.:
n
 
p
x
,
n
q
x
,
n
|
m
 
q
x
 
and their select equivalents
 
n
 p
[
x
]+
 ,
n
q
[
x
]+
 ,
n
|
m
q
[
x
]+
.3. Express the expected values and variances in objective (i) 3. in terms of the functions in1. and 2.

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