### Module Details

 The information contained in this module specification was correct at the time of publication but may be subject to change, either during the session because of unforeseen circumstances, or following review of the module at the end of the session. Queries about the module should be directed to the member of staff with responsibility for the module.
 Title FINANCIAL AND ACTUARIAL MODELLING IN R Code MATH377 Coordinator Dr J Yslas Altamirano Mathematical Sciences Jorge.Yslas-Altamirano@liverpool.ac.uk Year CATS Level Semester CATS Value Session 2021-22 Level 6 FHEQ Second Semester 15

### Aims

1.To give a set of applicable skills used in practice in financial and insurance institutions. To introduce students to specific programming techniques that are widely used in finance and insurance.

2.To provide students with a conceptual introduction to the basic principles and practices of the programming language R and to give them experience of carrying out calculations introduced in other modules of their programmes.

3.To develop the abilities to set standard financial and insurance models in order to manage the risk of the cash flow of financial and insurance companies, reserve, portfolio etc.

4.To develop the awareness of statistical and numerical limitations of financial and actuarial models and to know about modern approaches to tackle these limitations.

### Learning Outcomes

(LO1) To be able to import Excel files into R.

(LO2) To know how to create and compute standard functions and how to plot them.

(LO3) To be able to define and compute probability distributions and to be able to apply their statistical inference based on specific data sets and/or random samples.

(LO4) To know how to apply linear regression.

(LO5) To be able to compute aggregate loss distributions/stochastic processes and to find the probability of ruin.

(LO6) To know how to apply Chain Ladder and other reserving methods.

(LO7) To know how to price general insurance products.

(LO8) To be able to compute binomial trees.

(LO9) To know how to apply algorithms for yield curves.

(LO10) To be able to apply the Black-Scholes formula.

(LO11) To know how to develop basic Monte Carlo simulations.

(S1) Numeracy

(S2) Problem solving skills

(S3) Communication skills

(S4) IT skills

(S5) Organisational skills

(S6) Commercial awareness

### Syllabus

1. Fundamentals.

1.1 R code

1.2 Creating

1.3 Importing files

1.4 Functions in R

2. R for Statistical inference.

2.1 Probability distributions

2.2. Parametric inference

2.3 Linear Regression

2.4 Aggregate loss distribution / Ruin probability

2.5 Multivariate distributions

3. R for general insurance.

3.1 General insurance pricing

3.2 Claims reserving and IBNR

3.3 Reinsurance and extremal events

4. R for Finance.

4.1 Market portfolio and CAPM

4.2 Single period Binomial model

4.3 Multiperiod Binomial model

4.4 Yield curves

4.5 The Black and Scholes formula

4.6 The basic concepts of Monte Carlo simulation

4.7 Exotic options

### Recommended Texts

Reading lists are managed at readinglists.liverpool.ac.uk. Click here to access the reading lists for this module.

### Assessment

EXAM Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Final Assessment open book and remote Standard UoL penalty applies for late submission. This is not an anonymous assessment. Assessment Schedule (When) :Semester 2  1 hour time on task    50
CONTINUOUS Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
class test Standard UoL penalty applies for late submission. This is an anonymous assessment. Assessment Schedule (When) :Semester 2  around 60-90 minutes    50