Section A

1) Discuss the theoretical rationale behind ‘unit-linked insurance contracts’ with a specific reference to case of no guarantee.

2) How are benefit reserves for life insurance and annuities determined? Discuss.

Section B

3) State Markov’s theorem with examples. What condition should the random variable R possess for this result?

4) Define ‘survival function’. How is a ‘hazard function’ defined?

5) How is ‘ruin probability’ a classical risk measure? Explain.

6) What is ‘dynamic functional analysis’ (DFA)? What are the practical issues you would consider for selecting the interest rate in a DFA model?

7) Write short notes on:

      (a) Compound-Poisson Process;

      (b) Black-Scholes Theorem;

      (c) Panjer Recursion;

      (d) Risk neutral evaluation.