Spring 2018 Original exam Q12

keshav1996keshav1996
in W-09-RiskClassification

Hi,

The final rate changes for each class in the question as per the examination report are very different when I calculate them using the methodology given in Wiki article. Below are excerpts of my vs their calculations. Difference arises due to different calculations of the off-balance factors I think. Which one is correct and why?

My calculations: (Note- My off balance factor is calculated as Total of Cred Wtd Normalized rel. / Total exposure weighted average current rel. -1..... i.e 1/1.27685-1 )

image.png


Exam report calculations:

image.png


Thanks

Keshav

Comments

  • GrahamGraham

    After you calculate the credibility-weighted indicated relativity, you should normalize the results, not rebase them. (Normalizing means dividing by the total whereas rebasing means dividing by the base class.) Anyway, here's what I got following the method from the wiki. The red cells are the cells I added and the right-most column has the final answer which agrees with the examiner's report.

    Note that column (b) is calculated as (C-W Ind Rel)/0.9869, where 0.9869 is the exposure-weighted average of (C-W Ind Rel)

    image.png

    By the way, your solution would have gotten most of the points for this question even though your last step was not quite correct.

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