Modelling

Question 1

Advantages of using an existing model

Answer 1

1. Existing staff have an understanding of the workings and limitations of the existing models
2. Little adoption needed
3. Consistency in design
4. Existing staff will develop expertise in building up models

Question 2

Advantages of using a stochastic model

Answer 2

1. wider range of economic scenarios tested compared to the deterministic model
2. allow for the random nature of variables
3. allow for the correlation between them
4. Useful in assessing the impact of guarantees and options
5. Useful for allowing investment mismatching risks

Question 3

Model point

Answer 3

a set of data representing a single policy/a group of policies. It captures the most important characteristics of the policies that it represents. Useful as it is sometimes impossible to run the whole data set in the model.

Question 4

Model error

Answer 4

A model developed is not appropriate for the risk at hand - check using goodness of fit of the model output against the actual data while taking into account of the expected changes into the future.

Question 5

Parameter error

Answer 5

Errors involved in setting individual parameter/correlation between parameters - check using sensitivity analysis (must make allowance for correlation between the parameters)

Question 6

Limitations of models

Answer 6

It depends on
1. prone to model error/the accuracy of the model
2. data used/risk of data error
3. assumptions used/prone to parameter error
4. level and timing of cashflows is uncertain
5. random error

Question 7

Consideration in defining investment risk

Answer 7

1. Time period
2. Whether returns are measured in real/nominal terms
3. Currency in which to measure returns

Question 8

Model

Answer 8

A cut-down and simplified version of the reality that captures the essential feature of the problem and aids understanding (need communication)

Question 9

Choice of model points

Answer 9

1. time constraint
2. computer power
3. heterogeneity of groups
4. sensitivity of results to the choice of model points
5. purpose of modelling

Question 10

Protection of Personal Information Act

Answer 10

1. Accountability
2. Processing limitation
3. Purpose specification
4. Further processing limitation
5. Openness
6. Information quality
7. Security safeguard
8. Data subject participation

Question 11

Characteristics of big data

Answer 11

The increase use of technology has made it possible for public and private sectors to collect and analyse a large set of information
1. A large data set
2. Data form different sources
3. data which can be analysed very quickly

Question 12

Big data analysis

Answer 12

The process of analysing the large data set to uncover patterns, trends, correlations and other details that can be used for decision making

Question 13

Data governance

Answer 13

The overall management of the usability, integrity, availability and security of data within the organisation

Question 14

Data governance risk

Answer 14

1. legal and regulatory non-compliance
2. reputation damage (existing and new customers)
3. additional legal costs/fines
4. inappropriate to use for decision making