Syllabus for MA(ST) 412, Spring 2012

1. Instructor: Jeffrey S. Scroggs

Office Hours: Posted at http://www4.ncsu.edu/~scroggs/mywebsite/OfficeVisits.html.
E-mail address: scroggs@ncsu.edu
Office: SAS 2108 B
Phone Number: 919.515.7817
TA: Pavan Kumar Ramabhotla (email)
Instructor home page: http://www4.ncsu.edu/~scroggs/mywebsite
Course web site: http://www4.ncsu.edu/~scroggs/ma412
Class meeting times: TuTh, 3:00-4:15, 2225 SAS Hall

Communication: Moodle will be used for most communications in this course.

2. Requisites

Prerequisite: MA 241 or MA 231, Corequisite: MA 421, BUS(ST) 350, ST 301, ST 311, ST 361, ST 370, ST 371, ST 380 or equivalent

3. GER Statement

This class does not satisfy a General Education Requirement

4. Student learning outcomes for the course.

  1. Students will acquire a practical knowledge of the theory of interest in both finite and continuous time, and will be able to apply the concept of present value to the building of actuarial models on future contingent cash flows and failure time random variables.
  2. Students will be able to
    1. Explain the difference between a stochastic and a deterministic model and identify the advantages/disadvantages of each.
    2. Determine the characteristics of the components and the effects of changes to the components of actuarial models. Components include a deterministic interest rate structure, a scheme for the amounts of the cash flows, a probability distribution of the times of the cash flows, and the probability distribution of the present value of the set of cash flows
    3. Apply the equivalence principle to a model to associate a pattern of costs with a set of future contingent cash flows.
    4. Characterize discrete and continuous univariate probability distributions for failure time rand variables in terms of the life table functions, the cumulative distribution function, the survival function, the probability density function, and the hazard function (force of mortality), as appropriate, and establish relations between the different functions.
  3. Students will be able to determine an appropriate model for a given business problem. Business applications include premium rates for life insurance and annuity contracts, benefit reserves for insurance contracts, cost of a warranty for manufactured goods, and value of a financial instrument such as a loan or stock.

5. Textbooks (including links to sample answers, etc.)

Required

Models for Quantifying Risk, 4th Edition, $87
Authors: Robin Cunningham, Thomas N. Herzog, Richard L. London
Solutions Manual is available from the publisher

6. Course organization and scope and projected schedule of reading assignments.

Compound Interest and Basic Annuities: Theory of compound interest in both discrete and continuous time; application of concepts of present value and accumulated value to various streams of cash flow; nominal and effective interest and discount rates, and the force of interest; annuity-immediate and annuity-due

Failure Time Distributions: Discrete and continuous univariate probability distributions for failure time random variables, and their relation to life table functions, survival functions, and the force of mortality

Formulating Present Value Models (Life Insurance and Life Annuities): Formulating models (stochastic and deterministic) for the present value, with respect to an assumed deterministic interest rate structure, of a set of future contingent cash flows; characteristics of the probability distributions of the times of the cash flows and the present value of the set of cash flows

Obtaining Results from Present Value Models (Benefit Premiums and Benefit Reserves): Associating a pattern of costs with a set of future contingent cash flows; the evolution of liabilities under the cost pattern adopted; applications to insurance, health care, credit risk, environmental risk, consumer behavior, and warranties

7. Projected schedule of reading assignments.

Chapter 1 (all sections); 1-2 Weeks

Chapter 2 (all sections); 1-2 Weeks

Chapter 3; 1 Week

Chapter 5; 1-2 Weeks

Chapter 6; 2 Weeks

Chapter 7; 2 Weeks

Chapter 8; 2 Weeks

Chapter 9; 2 Weeks

8. Projected (TENTATIVE) schedule of homework due dates, quizzes and tests.

Homework is not collected.

There will be a quiz during dead week.

Except for the quiz during dead week, quizzes will not usually be announced in advance.

Feb. 14 (tentative) Exam 1

March 29 (tentative) Exam 2

May 10, 1:00-4:00pm, Final Exam (FIRM)

9. Grades

Scores and grades will be posted at Moodle (follow this link).

Weight Category of Assignment
30 %
Quizzes
20 % Hour Exam 1
20 % Hour Exam 2
30 % 
Final Examination

 

Percent Range Grade
97.6 <= X <= 100    A+ 
92.3 <= X < 97.6    A 
90.0  <= X < 92.3    A- 
87.6 <= X < 90.0    B+ 
82.3 <= X < 87.6    B 
80.0 <= X < 82.3    B- 
77.6 <= X < 80.0    C+ 
72.3 <= X < 77.6    C 
70.0 <= X < 72.3    C- 
67.6 <= X < 70.0    D+ 
62.3 <= X < 67.6    D 
60.0 <= X < 62.3    D- 
X < 60    F 

Quizzes

You can use your exam cheat sheet and/or calculator, but no other materials. The quiz will cover all the homework through the previous lecture. Some quizzes may be announced, and some quizzes may be a surprise.

Each quiz is graded out of 4 points. When the quiz is a single problem, here is the Scoring Rubric

4 points: conceptual understanding apparent; consistent notation, with only an occasional error; logical formulation; complete or near-complete solution/response
3 points: conceptual understanding only adequate; careless mathematical errors present (algebra, arithmetic, for example); some logical steps lacking; incomplete solution/response.
2 points: conceptual understanding not adequate; procedural errors; logical or relational steps missing; poor response or no response to the question posed.
1 points: does not attempt problem or conceptual understanding totally lacking.
0 points: missed the class for an unexcused absence.

Exams and Final Exam

Students that can work only the assigned homeworks problems should expect a C in the course; whereas, students that study the material and work more than just the assigned problems will likely earn an A or B.

Questions on exams will often be modifications of homework problems, examples from the textbook, and material presented in class. Some questions will be completely new.

The best way to earn a top grade is to (1) read the material before it is presented in class, (2) attend class and ask questions, (3) work homework after every class, and (4) form a study group to assist learning and homework completion.

10. Incomplete grades, late assignments, and missed exams.

Quizzes missed due to a excused absence will not be made up. Instead, the average score from the other quizzes will be used for the missing grade. If all quizzes are missed, the final exam grade will be used for the quiz grade.

Hourly Exams missed due to a excused absence will not be made up. Instead, the grade from the other exam will be used for the missing grade. If both exams are missed due to excused absences, then the final exam grade will be used for the missing grades.

11. Attendance, etc.

Excused Absence: NCSU policy, including what constitutes an 'Excused Absence,' is covered in REG 02.20.3. An absence will be 'excused' only after documentation of the situation is provided to the instructor. Whenever possible, notify the instructor at least one week in advance of missing class.

12. Academic Integrity.

The NCSU academic integrity policy is available at this linke: POL11.35.01.

Quizzes & Exams: Students will neither give nor receive any assistance on any quiz, hourly exam, or final exam. This means there is no use of electronic communication devices during exams, no student-to-student interactions, no wondering eyes, etc. Some students may be assigned seats for exams.

Exam cheat sheet: Each student can bring a single page of formulas to Hour Exams. The page cannot have worked problems, only formulas and the name of particular symbols (e.g. 'annuity-due') . The page can be no larger than 8 1/2 x 11 inches, and can have information both sides. A sigle sheet of paper is permitted, not two sheets stapled together. Each student creates their own formula page. You can discuss the formula sheet with other students, but the formula sheets should not be identical. The page will be turned in with exam, and may not be returned (keep a copy).

Any violation of this policy will be reported to the Office of Student Conduct. At the very least, a grade of F for this course will be requested.

13. Students with disabilities:

Reasonable accommodations will be made for students with verifiable disabilities. In order to take advantage of available accommodations, students must register with Disability Services for Students at 1900 Student Health Center, Campus Box 7509, 515-7653. For more information on NC State's policy on working with students with disabilities, please see the Academic Accommodations for Students with Disabilities Regulation (REG 02.20.1).

Students that require extra time or distraction free testing will be asked to use DSS for this service. The time for exams given at DSS must overlap with the exam time of the class. The exam dates will not change from what is originally posted in this syllabus unless all students in the course agree to the change (unanimous).

14. Laboratory safety/risk assumption:

There is no physical activity and no field trips associated with this course.

15. Statement on extra expenses:

There are no extra expenses related to this course.

16. Statement on transportation:

There are no field trips for this course.

17. Additional Links & Information

(revised, as needed)


Last revised 9-jan-12