Dependency modellingData Challenge12 July 2007

Welcome!

Short introduction to Quantitative Finance Network Lighthill Risk Network

Launch of the Data Challenge Next Steps Pub? Counts as 1.5 hours CPD!

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Quantitative Finance Network

Quant & Mammon Study (1999) Centre for the Study of Financial Innovation (CSFI)

Quantitative Finance Initiative (QFI) Engineering & Physical Sciences Research Council (EPSRC) Faculty and Institute of Actuaries Four Rounds of Funding (2001 to 2004)

EPSRC’s Sustainability Objective Switch from Directed to Responsive Mode To build a Network

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Quantitative Finance Network

Objectives:To build a sustainable network

linking researchers and practitioners to support the UK’s Financial Services sector

To identify challenges and opportunities to initiate and support research to present funding opportunities

To foster collaborationBranding for Profession’s knowledge transfer activities

CPD, research groups and workshops

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Quantitative Finance Network

“If you find a useful tool…”

Lighthill Risk Network

“…post it and tell the world”

Major initiative with other core members Lloyd’s, Benfield, RMS, Guy Carpenter,

Catlin

Bridge between academia and industry Offers “expert panels” on various risk

areas of interest to insurers: Catastrophe modelling Climate Change http://www.lighthillrisknetwork.org

Lighthill Risk Network Not for profit, set up Jan 2006, launched at Lloyd’s in

April 2007 Based at the Lighthill Institute of Mathematical Sciences

(LIMS) and administered within UCL Role as a facilitator not a sponsor of research No equivalent organisation exists, nearest are:

QFN (Quantitative Finance Network) funded by EPSRC and run by Institute of Actuaries

RPI (Risk Prediction Initiative) which sponsors research from Bermuda

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Lighthill Risk Network

“Harness collective intelligence”

Dependency modelling Timetable

12 July 2007 : Launch Pseudo Data 28 September 2007 : Solutions submitted to us 30 October : Climb the learning curve 8 November : Results and Keynote Speech

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The data challenge 10 years aggregate claims experience Psuedo classes of business

Property - Direct Property - Treaty Directors & Officers/Professional indemnity Workers Compensation/Employers Liability Aviation Marine Terrorism

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The data challenge The data will be provided as five tables

each a separate realisation each model slightly more complex labelled A, B, C, D and E.

Assume aggregate claims’ figures are accurate and final not subject to any estimation error.

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The data challenge

E.g model A

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Prop Dir Prot Tty D&O Motor Aviation Marine Terrorism1 4,392,877 4,957,489 11,875,772 352,264 2,683,619 1,582,571 3,682,8362 1,210,368 169,321 425,197 49,709 348,787 1,157,207 320,3263 513,107 163,440 178,327 126,060 1,175,306 1,034,776 101,3194 1,456,610 879,766 509,178 371,545 1,659,685 2,556,930 2,176,8805 1,362,217 727,015 3,947,293 114,091 1,861,580 1,837,041 1,532,8376 741,848 155,936 652,330 125,480 633,320 1,341,601 1,382,4687 716,256 56,748 360,660 102,717 490,584 467,470 962,7568 1,907,657 64,844 6,719,308 233,292 1,991,140 1,144,029 1,049,8839 8,096,957 7,432,153 28,746,236 439,606 8,373,110 6,154,731 5,966,128

10 939,179 413,274 1,009,098 109,187 470,398 1,760,280 618,884

Line of Business

Acc

iden

t Y

ear

The data challenge what is 99.5% Aggregate VaR? (across all lines

of business) what is 99.5% Aggregate TVaR (E(X|

X>VaR(X)) what is Mean for each line of business

individually? what is the Price for each line of business

individually?

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The data challenge Methods

Purpose = illustrate different approaches Any techniques may therefore be applied As long as participants are prepared to describe these and present

them at the autumn seminars.

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The data challengeSubmissions

Answers should be presented using the template to be supplied Accompanied by a written description of the approach

submissions used to select who will be invited to present identify and understand broadly the methods used without being overly long or going into great technical depth! 1,000 words (ish) Longer descriptions also welcome as attachments.

The completed answer templates and written submissions should be sent to Nicky Wilkinson at nicky.wilkinson@actuaries.org.uk by 28th September 2007. include full identification and contact details or upload yourself to the wiki and send a link to Nicky…

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The data challengePrizes (just for fun…) Answers ranked on absolute difference from the organisers’ calculated

estimates (OCE). this will give 15 rank figures for each submission the participant with the lowest sum of these ranks will be judged the winner.

Missing answers will be given the lowest rank Equally good answers across participants will be given the same rank. The prize for the best submission will be something. The winner and two runners-up will be announced at the autumn event and

their names will be published in The Actuary magazine.

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Pick the best tool for the job

Search out and use Prior Art

If you find a useful tool, post it and tell the World

Harness collective intelligence

We need a new relationship with IT

The Toolkit Manifesto