Theory of Interest Rates and Stochastic Processes in Life Insurance

The first calculation-based course of the Association's actuarial programme for specialists of insurance companies and brokers. The course combines the theory of interest with the random length of human life: from the equation of value and annuities to life tables, life annuities, single-life and multiple-life insurance and pension mathematics. Its depth matches international actuarial education syllabuses; all calculations are shown step by step and checked.

Course programme

1. Interest rates and the equation of value — effective and nominal rates, discount, force of interest, solving for an unknown payment, term and rate.
2. Financial annuities — annuities-immediate and annuities-due, deferred and increasing annuities, perpetuities, internal rate of return.
3. Loans and repayment schedules — outstanding balance by two methods, repayment schedule, sinking fund, early repayment.
4. Debt securities, yield, duration and convexity — bond price, duration, convexity, Redington immunisation.
5. Survival models and life tables — survival function, force of mortality, Gompertz and Makeham laws, life expectancy.
6. Life annuities — whole life, temporary and deferred annuities, commutation functions, payments several times a year.
7. Single-life insurance — whole life, term and endowment insurance, net premium, net premium reserve.
8. Joint insurance on several lives — joint-life and last-survivor status, reversionary pension for a surviving spouse.
9. Pension mathematics: basic level — defined benefit and defined contribution schemes, replacement ratio, pension liability.

Each lesson comes with notes containing a table of notation, a worked example and practice problems, plus a lesson test. The course final test consists of 25 questions and 10 calculation problems; ASAB certificate.

Duration: 9 video lessons, 2 h 13 min of video + lesson tests and a final test.