Related Research Articles
An actuary is a professional with advanced mathematical skills who deals with the measurement and management of risk and uncertainty. These risks can affect both sides of the balance sheet and require asset management, liability management, and valuation skills. Actuaries provide assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms. The name of the corresponding academic discipline is actuarial science.
Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, pension, finance, investment and other industries and professions.
In finance, valuation is the process of determining the value of a (potential) investment, asset, or security. Generally, there are three approaches taken, namely discounted cashflow valuation, relative valuation, and contingent claim valuation.
Monte Carlo methods are used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the distribution of their value over the range of resultant outcomes. This is usually done by help of stochastic asset models. The advantage of Monte Carlo methods over other techniques increases as the dimensions of the problem increase.
Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Here various valuation techniques are used by financial market participants to determine the price they are willing to pay or receive to effect a sale of the business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest.
In the United States, a minimum municipal obligation (MMO) is the state-mandated smallest amount a municipality must contribute to any pension plan established for its employees.
In the insurance industry in the United States, an experience modifier or experience modification is an adjustment of an employer's premium for worker's compensation coverage based on the losses the insurer has experienced from that employer. An experience modifier of 1 would be applied for an employer that had demonstrated the actuarially expected performance. Poorer loss experience leads to a modifier greater than 1, and better experience to a modifier less than 1. The loss experience used in determining the modifier typically comprises three years but excluding the immediate past year. For instance, if a policy expired on January 1, 2018, the period reflected by the experience modifier would run from January 1, 2014 to January 1, 2017.
"Stochastic" means being or having a random variable. A stochastic model is a tool for estimating probability distributions of potential outcomes by allowing for random variation in one or more inputs over time. The random variation is usually based on fluctuations observed in historical data for a selected period using standard time-series techniques. Distributions of potential outcomes are derived from a large number of simulations which reflect the random variation in the input(s).
Credibility theory is a branch of actuarial mathematics concerned with determining risk premiums. To achieve this, it uses mathematical models in an effort to forecast the (expected) number of insurance claims based on past observations. Technically speaking, the problem is to find the best linear approximation to the mean of the Bayesian predictive density, which is why credibility theory has many results in common with linear filtering as well as Bayesian statistics more broadly.
In insurance, an actuarial reserve is a reserve set aside for future insurance liabilities. It is generally equal to the actuarial present value of the future cash flows of a contingent event. In the insurance context an actuarial reserve is the present value of the future cash flows of an insurance policy and the total liability of the insurer is the sum of the actuarial reserves for every individual policy. Regulated insurers are required to keep offsetting assets to pay off this future liability.
The following outline is provided as an overview of and topical guide to finance:
Loss reserving is the calculation of the required reserves for a tranche of insurance business, including outstanding claims reserves.
In insurance, incurred but not reported (IBNR) claims is the amount owed by an insurer to all valid claimants who have had a covered loss but have not yet reported it. Since the insurer knows neither how many of these losses have occurred, nor the severity of each loss, IBNR is necessarily an estimate. The sum of IBNR losses plus reported losses yields an estimate of the total eventual liabilities the insurer will cover, known as ultimate losses.
Auto insurance risk selection is the process by which vehicle insurers determine whether or not to insure an individual and what insurance premium to charge. Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.
In the business of insurance, statutory reserves are those assets an insurance company is legally required to maintain on its balance sheet with respect to the unmatured obligations of the company. Statutory reserves are a type of actuarial reserve.
The project management triangle is a model of the constraints of project management. While its origins are unclear, it has been used since at least the 1950s. It contends that:
- The quality of work is constrained by the project's budget, deadlines and scope (features).
- The project manager can trade between constraints.
- Changes in one constraint necessitate changes in others to compensate or quality will suffer.
The value of work done (VOWD) is a project management technique for measuring and estimating the project cost at a point in time. It is mainly used in project environments of the Petroleum industry and is defined as the value of goods and services progressed, regardless of whether or not they have been paid for or received. The primary purpose of determining VOWD is to get an accurate and comprehensive as possible estimate of cost for a project at a point in time. This is used in overall project management including reporting and cost control.
The Bornhuetter–Ferguson method is a loss reserving technique in insurance.
Loss development factors or LDFs are used in insurance pricing and reserving to adjust claims to their projected ultimate level. Insurance claims, especially in long-tailed lines such as liability insurance, are often not paid out immediately. Claims adjusters set initial case reserves for claims; however, it is often impossible to predict immediately what the final amount of an insurance claim will be, due to uncertainty around defense costs, settlement amounts, and trial outcomes. Loss development factors are used by actuaries, underwriters, and other insurance professionals to "develop" claim amounts to their estimated final value. Ultimate loss amounts are necessary for determining an insurance company's carried reserves. They are also useful for determining adequate insurance premiums, when loss experience is used as a rating factor
Oil and gas reserves denote discovered quantities of crude oil and natural gas that can be profitably produced/recovered from an approved development. Oil and gas reserves tied to approved operational plans filed on the day of reserves reporting are also sensitive to fluctuating global market pricing. The remaining resource estimates are likely sub-commercial and may still be under appraisal with the potential to be technically recoverable once commercially established. Natural gas is frequently associated with oil directly and gas reserves are commonly quoted in barrels of oil equivalent (BOE). Consequently, both oil and gas reserves, as well as resource estimates, follow the same reporting guidelines, and are referred to collectively hereinafter as oil & gas.
References
- 1 2 3 4 5 6 7 8 9 Friedland, Jacqueline (July 30, 2010). "Estimating Unpaid Claims Using Basic Techniques" (PDF). Casualty Actuarial Society.
- ↑ Schmidt, Klaus D. (1999). "Chain Ladder Prediction and Asset Liability Management". Blätter der DGVFM. 24: 1–9. doi:10.1007/BF02808592. S2CID 167794128.
- 1 2 3 "Chain Ladder Method (CLM)".
- 1 2 3 Werner, Geoff; Modlin, Claudine; Willis Towers Watson (May 2016). "Basic Ratemaking" (PDF). Casualty Actuarial Society.
- 1 2 3 "Valuation and Reserving Techniques" (PDF). Archived from the original (PDF) on 2014-03-27. Retrieved 2016-03-13.
- ↑ Schmidt, Klaus D. (September 11–12, 2006). Methods and Models of Loss Reserving Based on Run-Off Triangles: A Unifying Survey (PDF). 2006 CAS Casualty Loss Reserve Seminar.
- ↑ "Understanding Loss Development Factors". 2011-10-03.
- ↑ Gisler, Alois; Wüthrich, Mario V. (2008). "Credibility for the Chain Ladder Reserving Method". ASTIN Bulletin: The Journal of the IAA. 38 (2): 565–600. doi:10.2143/AST.38.2.2033354. hdl: 20.500.11850/422522 . ISSN 0515-0361.