7 Which of the following is NOT true of Eurobonds?

A They are issued in Euros.

B They can be issued by a company or government.

C They are traded through banks.

D They are international bonds.

A large defined benefit pension scheme is closed to future benefit accrual. The scheme's managers are investigating how to reduce risk. (i) Describe how a liability driven investment (LDI) strategy may reduce investment risk. [4] In order to reduce longevity risk, the scheme managers are looking at purchasing annuity policies or using longevity swaps. (ii) Outline the advantages and disadvantages of purchasing annuity policies. [10] (iii) Explain how longevity swaps could mitigate the longevity risk. [4](i) Suggest three types of information source which could be used in recommending parameters to use in an actuarial model. [3] (ii) Comment on a practical difficulty which could arise with using each type of information source. [3] [Total 6]The following data are available for a sample of lives that were alive for at least some time between 1 January 2017 and 31 December 2017: date of birth; date of entry into observation (if entering after 1 January 2017); date of death (if died between 1 January 2017 and 31 December 2017); date of exit from observation while still alive (if leaving before 31 December 2017). (i) Derive a maximum likelihood estimator of the hazard of death which could be used with these data and which uses all the information available on the timing of death. [4] (ii) Explain how these data can be used to estimate a life table. [3]Claims on a portfolio of insurance policies arise as a Poisson process with parameter 2.. Individual claim amounts are taken from a distribution X and we define m; = E(X) for / = 1, 2, .... The insurance company calculates premiums using a premium loading of 0. (i) Define the adjustment coefficient R. [1] (ii) Show that R can be approximated as 20my by truncating the series expansion of My(1). m12 [3] Now suppose that X follows an exponential distribution with parameter y. dy (iii) Show that R = [3] (1 +0) The insurance company uses a premium loading of 12%, and the mean claim amount is 200. (iv) Calculate R, commenting on the difference with the approximation to R shown in part (ii). [3] The initial surplus is 5,000. (v) Calculate an upper bound for the ultimate probability of ruin. [1] (vi) Suggest two methods by which the insurance company can reduce the probability of ruin