Question

How does parameter risk differ from model risk in mortality assumption setting?

a.

Parameter risk arises from incorrect data, while model risk arises from incorrect model selection.

b.

Parameter risk arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model.

c.

Parameter risk refers to random fluctuations, while model risk refers to deviations from assumed mortality rates.

d.

Parameter risk arises from incorrect assumptions, while model risk arises from incorrect parameter selection.

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (b).Parameter risk arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model. Explanation:Parameter risk in mortality assumption setting arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model.

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Q. How does parameter risk differ from model risk in mortality assumption setting?
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