Be right! Pls

i) List six types of benefits that may be provided by the state. [3]

The government of a country was elected with a mandate to reform the pensions

system following a number of recent scandals due to employees losing their benefits.

Currently there is no legislation around occupational pensions and employers can

offer any form of benefits they wish to. The minister responsible for this policy has

asked for details of what can be done to reform the system.

(ii) Suggest ways in which the pension system could be reformed to improve

benefit security. [8]

The actuarial profession in the country is considering whether there is a need for

additional professional guidance in the light of these scandals.

(iii) Set out what this additional guidance might include. [4]

The government is also considering paying a universal income to all adult citizens

regardless of their circumstances. The same amount will be payable for everyone who

is eligible.

(iv) Outline the advantages and disadvantages of such a policy

2.

(i) List the advantages of graduation: . by parametric formula. . with reference to a standard table. . using a graphical method. [4] (ii) Outline the steps involved in graduating mortality rates with reference to a standard table. [3](i) Describe what is meant by the following terms: (a) discrete state space (b) stochastic model (c) continuous time model (d) stochastic process of mixed type [4] (ii) Describe the factors which should be considered when deciding whether to consider time in a discrete or continuous way for a model. (3]Consider a three-period binomial tree model for the non-dividend paying stock price process S,, in which the stock price either rises by u% or falls by d% each period till maturity. Let / denote the continuously compounded risk-free rate of interest. (i) State the conditions under which this market is arbitrage free. [1] Let So = 695 and assume this price either rises or falls by 20% each year for the next three years. Assume also that the risk-free rate is 5% per annum continuously compounded. (ii) Calculate the price of a vanilla European put option with maturity in three years and strike price 110. [4] Assume a change in market conditions such that the same share price now either rises or falls by 5% each year for the next three years. (HiD) Determine how this change would impact on the option price. [2]