Structure. This group of exercises typically begins with an exercise from the professional actuarial associations – typically, a Society of Actuaries Exam C problem. After the exercise statement, the reader is asked to work the problem. These type of problems are based on applications of the theory and are designed to familiarize the reader with theoretical foundations.
Begin with Theory. Working this type of exercise not only helps the reader become familiar with the theoretical underpinnings of Loss Data Analytics but also provides valuable practice for those seeking to take the professional actuarial examinations.
From Theory to Practice. To show how to put the theory into practice, this tutorial follows up on the theory by providing R code to show how to arrive at a solution. By following this code, readers will not only get better insights into theory but also will learn to appreciate how to implement procedures. Typically, hand calculation problems are restrict to a few, e.g., five observations, whereas a computer coded implementation can nearly as easily handle 50,000 observations.
The Advantages of Coding. The coding approach has an additional pedagogical advantage. With the basic code established, one can not only handle the exercise posed but also alternative (what-if) scenarios as well as immediate extensions. Further, sometimes a graphical analysis can provide additional flavor to the problem.
Your Assignment. In reviewing these exercises, ideally the reader will:
- Work the problem posed referring only to basic theory
- Try the R code, perhaps just cutting-and-pasting the code into a development environment to see it run live.
- With the R code, look up each command to become familiar with it.
- Change the inputs (data) to see how the results change.