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2017/2018  KAN-CCMVV2611U  Pension Liabilities and their Dynamics

English Title
Pension Liabilities and their Dynamics

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Claus Parum - Department of Finance (FI)
Teacher: Mogens Steffensen
Further information: https:/​/​studentcbs.sharepoint.com/​CEMS/​Pages/​Valgfag-paa-CBS_DK.aspx
Main academic disciplines
  • Finance
  • Mathematics
  • Statistics and quantitative methods
Last updated on 30-06-2017

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Define and analyse the survival model
  • Formalise insurance products by means of payment streams in survival models
  • Characterize conditional expected present values by means of differential equations
  • Analyse the emergence of surplus in life insurance contracts defined by survival models
  • Discuss different methods for redistribution of surplus
  • Formalize the unit-link product with and without guarantees and characterize its value
  • Interpret results from life insurance to the area of credit risk
  • Establish the key accounting and solvency balance scheme entries based on a survival model
Course prerequisites
The course is especially relevant for students with a strong background in finance e.g. students in MSc FIR, FSM, FIN and AEF as well as MSc in Advanced Economics and Finance.
Pension Liabilities and their Dynamics:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter
Aids Open book: all written and electronic aids, including internet access
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure

The course gives an introduction to life insurance mathematics at an operational level. The idea is to cover essentially all aspects of life insurance mathematics for elementary products with payments contingent on the policy holder being dead or alive (term insurance, life annuities, endowment insurance etc.) Extensions to other life event contracts (disability annuities, unemployment insurance, premium waiver benefits etc.) are only vaguely discussed. Topics covered include mortality modeling; reserves; expected cash flows; linear difference and differential equations. Thiele’s differential equation; relations to credit risk modeling and credit derivative pricing; stochastic interest and mortality rates; emergence and redistribution of surplus in guaranteed products; fundamentals of unit-link products; unit-link products with guarantees; policy holder options; expenses and profitability considerations; technical versus market-based valuation; relations to essential concepts in accounting and solvency for a pension fund; discussions about the demand for life insurance and pension contracts.

Teaching methods
Lectures. 8 weeks with 4 lectures in one day.
Feedback during the teaching period
Via discussion during lecture and exercise sesstions
Student workload
Teaching 33 hours
Preparation 170 hours
Exam 3 hours
Expected literature

Lecture notes.

Last updated on 30-06-2017