2019 Fall - 3a.
Could you explain why we would use (indicated rate change / implemented rate change) as the complement of credibility? Part a. asks us to use the trended present rates as the complement, so I would have though we should only use the implemented rate change.
Comments
The full formula for the complement is:
The ratio you referenced in the formula above is required because the implemented rate change is not always the same as the indicated rate change. The complement should be based on the original indicated rate change and this ratio makes that adjustment.