The aim of this subject is to provide a grounding in the principles of modelling as applied to actuarial work – focusing particularly on stochastic asset liability models and the valuation of financial derivatives. These skills are also required to communicate with other financial professionals and to critically evaluate modern financial theories.
|Academic unit:||Bond Business School|
|Subject title:||Actuarial and Financial Models|
Delivery & attendance
|Attendance and learning activities:||Attendance is compulsory. Materials that are discussed in both lecture and lab session are EXAMINABLE. You run the risk of missing important material, as well as crucial guidelines to work through assignment problems and exams, if you do not attend.|
|Prescribed resources:|| |
|[email protected] & Email:||[email protected] is the online learning environment at Bond University and is used to provide access to subject materials, lecture recordings and detailed subject information regarding the subject curriculum, assessment and timing. Both iLearn and the Student Email facility are used to provide important subject notifications. Additionally, official correspondence from the University will be forwarded to students’ Bond email account and must be monitored by the student.|
To access these services, log on to the Student Portal from the Bond University website as www.bond.edu.au
Assumed knowledge is the minimum level of knowledge of a subject area that students are assumed to have acquired through previous study. It is the responsibility of students to ensure they meet the assumed knowledge expectations of the subject. Students who do not possess this prior knowledge are strongly recommended against enrolling and do so at their own risk. No concessions will be made for students’ lack of prior knowledge.
Possess demonstratable knowledge in mathematical statistics and probability theory to the level of a unit such as ACSC71-200 Mathematical Statistics.
Assurance of learning
Assurance of Learning means that universities take responsibility for creating, monitoring and updating curriculum, teaching and assessment so that students graduate with the knowledge, skills and attributes they need for employability and/or further study.
At Bond University, we carefully develop subject and program outcomes to ensure that student learning in each subject contributes to the whole student experience. Students are encouraged to carefully read and consider subject and program outcomes as combined elements.
Program Learning Outcomes (PLOs)
Program Learning Outcomes provide a broad and measurable set of standards that incorporate a range of knowledge and skills that will be achieved on completion of the program. If you are undertaking this subject as part of a degree program, you should refer to the relevant degree program outcomes and graduate attributes as they relate to this subject.
Subject Learning Outcomes (SLOs)
On successful completion of this subject the learner will be able to:
- Apply modern asset and derivatives pricing theory to implement valuation methodology to insurance and finance applications
- Assess stochastic models of financial securities and other asset pricing situations
- Demonstrate the use of stochastic interest rate modelling concept and the practically used term structures modelling of interest rates
- Analyse simple models for credit risk assessment.
- Apply ruin theory to liability valuation in insurance contexts
- Demonstrate run-off techniques in general insurance reserving applications
- Design asset liability valuation methodologies in Excel/VBA to various insurance and finance applications.
|Essay||Assignment 1 - paper based problem-solving task||10%||Week 4||1, 2, 7.|
|Analysis||Assignment 2 - computer-based problem-solving task||10%||Week 9||1, 2, 3, 7.|
|Paper-based Examination (Limited Open)||Final Examination||50%||Final Examination Period||1, 2, 3, 4, 5, 6, 7.|
|Paper-based Examination (Limited Open)||The mid-semester Examination will cover material up to and including week 5.||30%||Week 7 (Mid-Semester Examination Period)||1, 2, 7.|
- * Assessment timing is indicative of the week that the assessment is due or begins (where conducted over multiple weeks), and is based on the standard University academic calendar
- C = Students must reach a level of competency to successfully complete this assessment.
|High Distinction||85-100||Outstanding or exemplary performance in the following areas: interpretative ability; intellectual initiative in response to questions; mastery of the skills required by the subject, general levels of knowledge and analytic ability or clear thinking.|
|Distinction||75-84||Usually awarded to students whose performance goes well beyond the minimum requirements set for tasks required in assessment, and who perform well in most of the above areas.|
|Credit||65-74||Usually awarded to students whose performance is considered to go beyond the minimum requirements for work set for assessment. Assessable work is typically characterised by a strong performance in some of the capacities listed above.|
|Pass||50-64||Usually awarded to students whose performance meets the requirements set for work provided for assessment.|
|Fail||0-49||Usually awarded to students whose performance is not considered to meet the minimum requirements set for particular tasks. The fail grade may be a result of insufficient preparation, of inattention to assignment guidelines or lack of academic ability. A frequent cause of failure is lack of attention to subject or assignment guidelines.|
For the purposes of quality assurance, Bond University conducts an evaluation process to measure and document student assessment as evidence of the extent to which program and subject learning outcomes are achieved. Some examples of student work will be retained for potential research and quality auditing purposes only. Any student work used will be treated confidentially and no student grades will be affected.
Students must check the [email protected] subject site for detailed assessment information and submission procedures.
Policy on late submission and extensions
A late penalty will be applied to all overdue assessment tasks unless an extension is granted by the subject coordinator. The standard penalty will be 10% of marks awarded to that assessment per day late with no assessment to be accepted seven days after the due date. Where a student is granted an extension, the penalty of 10% per day late starts from the new due date.
Policy on plagiarism
University’s Academic Integrity Policy defines plagiarism as the act of misrepresenting as one’s own original work: another’s ideas, interpretations, words, or creative works; and/or one’s own previous ideas, interpretations, words, or creative work without acknowledging that it was used previously (i.e., self-plagiarism). The University considers the act of plagiarising to be a breach of the Student Conduct Code and, therefore, subject to the Discipline Regulations which provide for a range of penalties including the reduction of marks or grades, fines and suspension from the University.
Feedback on assessment
Feedback on assessment will be provided to students within two weeks of the assessment submission due date, as per the Assessment Policy.
If you have a disability, illness, injury or health condition that impacts your capacity to complete studies, exams or assessment tasks, it is important you let us know your special requirements, early in the semester. Students will need to make an application for support and submit it with recent, comprehensive documentation at an appointment with a Disability Officer. Students with a disability are encouraged to contact the Disability Office at the earliest possible time, to meet staff and learn about the services available to meet your specific needs. Please note that late notification or failure to disclose your disability can be to your disadvantage as the University cannot guarantee support under such circumstances.
derivatives market, insurance business
forward, futures, swap, options, no arbitrage, complete market
discrete time model, lattice method, risk neutral pricing, implementation
log-normal model, Brownian Motion, stochastic differential equation, Ito's Lemma
continuous time model, Black-Scholes formula, implementation
replication, hedging, 'Greeks'
stochastic models, term structure of interest rates
credit risk, default-able financial products
stochastic liability model, probability of ruin, simulation
run-off triangle data, basic chain ladder, average cost per claim, Bornhuetter-Ferguson methods and the inflation adjusted versions