CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam

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An actuary computes Mack's age-to-age factor variance estimator sigma squared for development period j. Which formula is correct?

sigma squared sub j = (1/(I-j-1)) * sum over i of C sub i,j * (f sub i,j - f hat sub j) squared sigma squared sub j = (1/(I-j)) * sum over i of (C sub i,j+1 - C sub i,j) squared sigma squared sub j = mean squared development factor minus one sigma squared sub j = product of historical age-to-age factors minus the mean

Correct Answer:

sigma squared sub j = (1/(I-j-1)) * sum over i of C sub i,j * (f sub i,j - f hat sub j) squared

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