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1 Exam P Learning Objectives All 23 learning objectives are covered. General Probability STAT2400 STAT2400 STAT2400 STAT2400 STAT2400 STAT2400 STAT Set functions including set notation and basic elements of probability 2. Mutually exclusive events 3. Addition and multiplication rules 4. Independence of events 5. Combinatorial probability 6. Conditional probability 7. Bayes Theorem / Law of total probability Univariate probability distributions (including binomial, negative binomial, geometric, hypergeometric, Poisson, uniform, exponential, chi-square, beta, Pareto, lognormal, gamma, Weibull, and normal) STAT2400&3400 STAT2400&3400 STAT2400&3400 STAT2400&3400 STAT3400 STAT Probability functions and probability density functions 9. Cumulative distribution functions 10. Mode, median, percentiles, and moments 11. Variance and measures of dispersion 12. Moment generating functions 13. Transformations Multivariate probability distributions (including the bivariate normal) STAT3400&3800 STAT3400 STAT3400&3800 STAT3400 STAT3400 STAT3800 STAT3400 STAT3400 STAT3400&3800 STAT2400&3400& Joint probability functions and joint probability density functions 15. Joint cumulative distribution functions 16. Central Limit Theorem 17. Conditional and marginal probability distributions 18. Moments for joint, conditional, and marginal probability distributions 19. Joint moment generating functions 20. Variance and measures of dispersion for conditional and marginal probability distributions 21. Covariance and correlation coefficients 22. Transformations and order statistics 23. Probabilities and moments for linear combinations of independent random variables

2 Exam FM Learning Objectives All 22 learning objectives are covered. Time Value of Money (Interest Theory) 1. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Interest rate (rate of interest) ACT2120 b. Simple interest ACT2120 c. Compound interest ACT2120 d. Accumulation function ACT2120 e. Future value ACT2120 f. Present value/net present value ACT2120 g. Discount factor ACT2120 h. Discount rate (rate of discount) ACT2120 i. Convertible m-thly ACT2120 j. Nominal rate ACT2120 k. Effective rate ACT2120 l. Force of interest m. Equation of value ACT The candidate will be able to: ACT2120 a. Given any two of interest rate, present value, or future value, calculate the third based on simple or compound interest. ACT2120 b. Given any one of the effective interest rate, the nominal interest rate convertible m-thly, the effective discount rate, the nominal discount rate convertible m-thly, or the force of interest, calculate all of the other items. c. Write the equation of value given a set of cash flows and an interest rate. ACT2120 Annuities with payments that are not contingent (Interest Theory)

3 3. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Annuity-immediate ACT2120 b. Annuity-due ACT2120 c. Perpetuity ACT2120 d. Payable m-thly ACT2120 e. Level payment annuity ACT2120 f. Arithmetic increasing/ decreasing payment annuity ACT2120 g. Geometric increasing/ decreasing payment annuity h. Term of annuity ACT The candidate will be able to: ACT2120 a. Given an annuity with level payments, immediate (or due), payable m-thly, and any three of present value, future value, interest rate, payment, and term calculate the remaining two items. ACT2120 b. Given an annuity with non-level payments, immediate (or due), payable m-thly, the pattern of payment amounts, and any three of present value, future value, interest rate, payment amounts, and term of annuity calculate the remaining two items. Exam FM Learning Objectives Loan (Interest Theory) 5. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Principal ACT2120 b. Interest ACT2120 c. Term of loan ACT2120 d. Outstanding balance ACT2120 e. Final payment (drop payment, balloon payment) ACT2120 f. Amortization ACT2120 g. Sinking fund 6. The candidate will be able to: ACT2120 a. Given any four of term of loan, interest rate, payment amount, payment period, principal, calculate the remaining items. ACT2120 b. Calculate the outstanding balance at any point in time. ACT2120 c. Calculate the amount of interest and principal repayment in a given payment. ACT2120 d. Given the quantities, except one, in a sinking fund arrangement calculate the missing quantity. Bonds (Interest Theory)

4 7. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Price ACT2120 b. Redemption value ACT2120 c. Par Value/Face value ACT2120 d. Coupon, Coupon rate ACT2120 e. Term of bond ACT2120 f. Yield rate ACT2120 g. Callable/non-callable ACT2120 h. Book value ACT2120 i. Accumulation of discount 8. The candidate will be able to: ACT2120 a. Given any four of price, redemption value, yield rate, coupon rate, and term of bond, calculate the remaining item. General Cash Flows and Portfolios (Interest Theory) 9. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Yield rate/rate of return ACT2120 b. Dollar-weighted rate of return/timeweighted rate of return ACT2120 c. Current value ACT2120 d. Duration (Macaulay and modified) ACT2120 e. Convexity ACT2120 f. Portfolio ACT2120 g. Spot rate ACT2120 h. Forward rate ACT2120 i. Yield curve j. Stock price, stock dividend ACT2120

5 Exam FM Learning Objectives 10. The candidate will be able to: ACT2120 a. Calculate the current value of a set of cash flows. ACT2120 b. Calculate the portfolio yield rate. ACT2120 c. Calculate the dollar-weighted and time-weighted rate of return. ACT2120 d. Calculate the duration and convexity of a set of cash flows. ACT2120 e. Calculate either Macaulay or modified duration given the other. ACT2120 f. Use duration and convexity to approximate the change in present value due to a change in interest rate. g. Calculate the price of a stock using the dividend discount model. ACT2120 Immunization (Interest Theory) 11. The candidate will be able to define and recognize the definitions of the following terms: ACT2120 a. Cash-flow matching ACT2120 b. Immunization (including full immunization) c. Redington immunization. ACT The candidate will be able to: ACT2120 a. Construct an investment portfolio to fully immunize a set of liability cash flows. ACT2120 b. Construct an investment portfolio to match present value and duration of a set of liability cash flows. c. Construct an investment portfolio to exactly match a set of liability cash flows. ACT2120

6 Exam FM Learning Objectives General Derivatives (Financial Economics) 13. The candidate will be able to define and recognize the definitions of the following terms: a. Derivative, Underlying asset, Over-the-counter market b. Ask price, Bid price, Bid-ask spread c. Short selling, Short position, Long position d. Stock index e. Spot price f. Net profit/payoff g. Credit risk h. Marking-to-market i. Margin, Maintenance margin, Margin call 14. The candidate will be able to evaluate an investor's margin position based on changes in asset values. Options (Financial Economics) 15. The candidate will be able to define and recognize the definitions of the following terms: a. Call option, Put option b. Expiration, Expiration date c. Strike price/exercise price d. European option, American option, Bermudan option e. In-the-money, At-the-money, Out-of-the-money f. Covered call, Naked writing g. Dividends h. Put-call parity 16. The candidate will be able to evaluate the payoff and profit of basic derivative contracts. Hedging and Investment Strategies (Financial Economics) 17. The candidate will be able to define and recognize the definitions of the following terms: a. Hedging, Arbitrage b. Diversifiable risk, Nondiversifiable risk c. Synthetic forwards d. Spreads (including bull, bear, box, and ratio spreads) e. Collars (including zero-cost collars), Paylater strategy f. Straddles (including strangles, written straddles and butterfly spreads) g. Convertible bond, Mandatorily convertible bond 18. The candidate will be able to: a. Explain how derivative securities can be used as tools to manage financial risk. b. Explain the reasons to hedge and not to hedge. c. Evaluate the payoff and profit of hedging strategies.

7 Exam FM Learning Objectives Forwards and Futures (Financial Economics) 19. The candidate will be able to define and recognize the definitions of the following terms: a. Forward contract, Prepaid forward contract b. Outright purchase, Fully leveraged purchase c. Implied repo rate d. Cost of carry e. Lease rate f. Futures contract 20. The candidate will be able to: a. Determine forward price from prepaid forward price. b. Explain the relationship between forward price and futures price. c. Explain the relationship between forward price and future stock price. d. Use the concept of no-arbitrage to determine the theoretical value of futures and forwards. e. Given any four of call premium, put premium, forward price, strike price and interest rate, calculate the remaining item using the put-call parity formula. Swaps (Financial Economics) 21. The candidate will be able to define and recognize the definitions of the following terms: a. Swap, Prepaid swap b. Swap term, Swap spread, Notional Amount c. Simple commodity swap, Interest rate swap d. Deferred swap 22. The candidate will be able to use the concept of no-arbitrage to determine the theoretical values of swaps.

8 Exam MFE Learning Objectives All 15 learning objectives are covered. Interest rate models 1. Evaluate features of the Vasicek and Cox-Ingersoll-Ross bond price models. 2. Explain why the time-zero yield curve in the Vasicek and Cox-Ingersoll-Ross bond price models cannot be exogenously prescribed. 3. Construct a Black-Derman-Toy binomial model matching a given time-zero yield curve and a set of volatilities. Rational valuation of derivative securities Simulation 4. Use put-call parity to determine the relationship between prices of European put and call options and to identify arbitrage opportunities. 5. Calculate the value of European and American options using the binomial model. 6. Calculate the value of European and American options using the Black-Scholes option-pricing model. 7. Interpret the option Greeks. 8. Explain the cash flow characteristics of the following exotic options: Asian, barrier, compound, gap, and exchange. 9. Explain the properties of a lognormal distribution and explain the Black-Scholes formula as a limited expected value for a lognormal distribution. 10. Explain what it means to say that stock prices follow a diffusion process. 11. Apply Itô s lemma in the one-dimensional case. 12. Apply option pricing concepts to actuarial problems such as equity-linked insurance. 13. Simulate lognormal stock prices. 14. Use variance reduction techniques to accelerate convergence. Risk management techniques 15. Explain and demonstrate how to control risk using the method of delta-hedging.

9 Exam MLC Learning Objectives All 13 learning objectives are covered. Survival models 1. Define survival-time random variables ACT3130&3530 a. for one life, both in the single- and multiple-decrement models ACT3230 b. for two lives, where the lives are independent or dependent (including the common shock model). ACT3130& Calculate the expected values, variances, probabilities, and percentiles for survival-time random variables. 3. Define the continuous survival-time random variable that arises from the discrete survival-time random variable using ACT3130 a: a. uniform distribution ACT3130 b. constant force of mortality c. hyperbolic assumption ACT3130 Markov Chain Models 4. Define non-homogeneous and homogeneous discrete-time Markov Chain models and calculate the probabilities of ACT3530 a. being in a particular state b. transitioning between particular states. ACT3530 Life insurances and annuities 5. Define present-value-of-benefit random variables defined on survival-time random variables: ACT3130&3530 a. for one life, both in the single- and multiple-decrement models ACT3230 b. for two lives, where the lives are independent or dependent (including the common shock model). 6. Define and calculate the expected values, variances and probabilities for: ACT3130&3530 a. present-value-of-benefit random variables ACT3230 b. present-value-of-loss-at-issue random variables, as a function of the considerations (premiums) ACT3230 c. present-value-of-loss random variables, as a function of the considerations (premiums). 7. Calculate considerations (premiums) for life insurances and annuities, ACT3230&3530 a. using the Equivalence Principle ACT3230 b. using percentiles. 8. Calculate liabilities, analyzing the present-value-of-future-loss random variables: ACT3230&3530 a. using the prospective method ACT3230 b. using the retrospective method c. using special formulas. ACT3230

10 Exam MLC Learning Objectives 9. Calculate ACT3530 ACT3530 ACT3530 a. gross considerations (expense-loaded premiums) b. expense-loaded liabilities (reserves) c. asset shares. ACT Using recursion, calculate expected values (reserves) and variances of present-value-offuture-loss random variables for general fully-discrete life insurances written on a single life. 11. Extend the present-value-of-benefit, present-value-of-loss-at-issue, present-value-of-futureloss random variables and liabilities to discrete-time Markov Chain models, to calculate ACT3530 a. actuarial present values of cash flows at transitions between states ACT3530 b. actuarial present values of cash flows while in a state ACT3530 c. considerations (premiums) using the Equivalence Principle d. liabilities (reserves) using the prospective method. ACT3530 Poisson processes ACT Define Poisson process and compound Poisson process. 13. Define and calculate expected values, variances, and probabilities for Poisson processes, ACT3530 a. using increments in the homogeneous case ACT3530 b. using interevent times in the homogeneous case c. using increments in the non-homogeneous case. ACT3530

11 Exam C Learning Objectives All 33 learning objectives are covered. Severity Models 1. Calculate the basic distributional quantities: a. Moments b. Percentiles c. Generating functions 2. Describe how changes in parameters affect the distribution. 3. Recognize classes of distributions and their relationships. 4. Apply the following techniques for creating new families of distributions: a. Multiplication by a constant b. Raising to a power c. Exponentiation, d. Mixing Frequency Models 5. Identify the applications in which each distribution is used and reasons why. 6. Apply the distribution to an application, given the parameters. 7. Calculate various measures of tail weight and interpret the results to compare the tail weights. 8. For the Poisson, Mixed Poisson, Binomial, Negative Binomial, Geometric distribution and mixtures thereof: a. Describe how changes in parameters affect the distribution, b. Calculate moments, c. Identify the applications for which each distribution is used and reasons why, d. Apply the distribution to an application given the parameters. e. Apply the zero-truncated or zero-modified distribution to an application given the parameters Aggregate Models 11. Compute aggregate claims distributions. 9. Compute relevant parameters and statistics for collective risk models. 10. Evaluate compound models for aggregate claims. For severity, frequency and aggregate models

12 12. Evaluate the impacts of coverage modifications: a. Deductibles b. Limits c. Coinsurance Risk Measures 13. Calculate Loss Elimination Ratios. 14. Evaluate effects of inflation on losses. 15. Calculate VaR, and TVaR and explain their use and limitations.

13 Construction of Empirical Models 16. Estimate failure time and loss distributions using: ACT4240 a. Kaplan-Meier estimator, including approximations for large data sets ACT4240 b. Nelson-Åalen estimator c. Kernel density estimators ACT4240 ACT Estimate the variance of estimators and confidence intervals for failure time and loss distributions. 18. Apply the following concepts in estimating failure time and loss distribution: ACT4240 a. Unbiasedness ACT4240 b. Consistency c. Mean squared error ACT4240 Construction and Selection of Parametric Models 19. Estimate the parameters of failure time and loss distributions using: ACT4240 a. Maximum likelihood ACT4240 b. Method of moments ACT4240 c. Percentile matching d. Bayesian procedures ACT Estimate the parameters of failure time and loss distributions with censored and/or truncated data using maximum likelihood. ACT Estimate the variance of estimators and the confidence intervals for the parameters and functions of parameters of failure time and loss distributions. 22. Apply the following concepts in estimating failure time and loss distributions: ACT4240 a. Unbiasedness ACT4240 b. Asymptotic unbiasedness ACT4240 c. Consistency ACT4240 d. Mean squared error ACT4240 e. Uniform minimum variance estimator 23. Determine the acceptability of a fitted model and/or compare models using: ACT4240 a. Graphical procedures ACT4240 b. Kolmogorov-Smirnov test ACT4240 c. Anderson-Darling test ACT4240 d. Chi-square goodness-of-fit test ACT4240 e. Likelihood ratio test f. Schwarz Bayesian Criterion ACT4240

14 Credibility. Simulation 24. Apply limited fluctuation (classical) credibility including criteria for both full and partial credibility. 25. Perform Bayesian analysis using both discrete and continuous models. 26. Apply Bühlmann and Bühlmann-Straub models and understand the relationship of these to the Bayesian model. 27. Apply conjugate priors in Bayesian analysis and in particular the Poisson-gamma model. 28. Apply empirical Bayesian methods in the nonparametric and semiparametric cases 29. Simulate both discrete and continuous random variables using the inversion method. 30. Estimate the number of simulations needed to obtain an estimate with a given error and a given degree of confidence. 31. Use simulation to determine the p-value for a hypothesis test. 32. Use the bootstrap method to estimate the mean squared error of an estimator. 33. Apply simulation methods within the context of actuarial models.

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