Solutions to Exercise List 11 and home exam

I have uploaded some lecture notes for pricing of bonds that you can download here or by going to lecture notes. You do not need to study everything, just check the formulas for the case of Vasicek model. I have uploaded suggested solutions for the final exercise list 11, here.

The home exam will consist of two main exercises with several items. Problem 1 has 5 items and Problem 2 has 4 items. All items are worth 1 point except for the very last one which is worth 2 points, summing up a total of 10 points. Given the Corona situation, you need a regular E to pass, which means 4 points out of 10. In the exam, it is important that you explain how you arrive to the results, not only by providing the R-code, but also the mathematical procedure and formulae. (This does not mean you have to prove every step, but rather explain what formulas you apply and why). As an example of how to solve a home exam you may think of it as an assignment and follow the same reasoning as the suggested solution for the assignment that you have.

Finally, I would recommend you to solve a similar exercise as Exercise 2 from the assignment for different types of insurances. Try insurances with one or two policyholders, or different criteria, for example, endowment with death benefit with different states, etc. You can make your own policy and be creative. I can help you if you have questions. Another thing that may be good for you to look at is that you solve a classical problem from the lectures, say an endowment, but with stochastic interest rate (e.g. Vasicek) and do some simulations. For example, Problem 3 from List 11 is worth looking at very thoroughly. You can also look at unit-linked policies where you make your own policy. Compute reserves! Also stochastic reserves!

If you need an appointment for solving questions, let me know by sending me an e-mail and we can arrange a Zoom meeting or I can help you with questions via e-mail.

Good luck!

Published May 20, 2020 2:21 PM - Last modified May 20, 2020 2:21 PM