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Actuarial Mathematics for Life Contingent Risks

D. C. M. Dickson, M. R. Hardy and H. R. Waters
Cambridge University Press
Publication Date: 
Number of Pages: 
International Series on Actuarilal Science
[Reviewed by
John P. Curran
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This textbook is written for students who intend to become actuaries. In North America, aspiring actuaries must pass exams offered by various professional organizations, the most prominent being the Society of Actuaries (SOA). This text can be used to prepare for the SOA’s actuarial models (M) exam, in particular for the life contingencies (MLC) segment.

Although the book under review is not sanctioned by the SOA for the MLC exam, it can be substituted safely for the sanctioned textbooks (Actuarial Mathematics by Broverman et al., and Models for Quantifying Risk by Cunningham et al.). There are differences between these books in emphasis and organization, but these differences are unimportant, and certainly do not warrant the sanctioned books having prices two and three times higher than Actuarial Mathematics for Life Contingent Risks. In general, the book under review has a more applied and less theoretical point of view than the sanctioned books, and has longer and more detailed exercises.

Actuarial Mathematics for Life Contingent Risks also includes material relevant to the financial economics segment of the M exam (MLE), namely basic option pricing using binomial and Black-Scholes models, embedded options, and equity-linked insurance contracts. Although not comprehensive, the coverage of these concepts is oriented towards applications to insurance products.

I will recommend this book to my students. I encourage teachers of actuarial science to have a look at it.

John Curran is Assistant Professor of Mathematics at Eastern Michigan University, where he also coordinates the actuarial science program.

Preface; 1. Introduction to life insurance; 2. Survival models; 3. Life tables and selection; 4. Insurance benefits; 5. Annuities; 6. Premium calculation; 7. Policy values; 8. Multiple state models; 9. Pension mathematics; 10. Interest rate risk; 11. Emerging costs for traditional life insurance; 12. Emerging costs for equity-linked insurance; 13. Option pricing; 14. Embedded options; A. Probability theory; B. Numerical techniques; C. Simulation; References; Index.