Question

What is "model" risk in mortality assumption setting?

a.

The risk associated with incorrect or inadequate data used to derive parameters

b.

The risk that the model used to estimate future mortality may contain errors or may not be appropriate

c.

The risk of random fluctuations in mortality experience not corresponding with the adopted model and parameters

d.

The risk of mortality being more adverse than assumed due to incorrect parameter selection

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (b).The risk that the model used to estimate future mortality may contain errors or may not be appropriate Explanation:"Model" risk in mortality assumption setting refers to the risk that the model used to estimate future mortality may contain errors or may not be appropriate.

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Q. What is "model" risk in mortality assumption setting?
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