What is the specialty of Actuarial Science:

Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, finance, and other industries and professions. In general, actuaries apply rigorous mathematics to model uncertainty issues.

Actuaries are professionals trained in this specialty. In many countries, actuaries must prove their competence by passing a series of rigorous professional exams.

Actuarial science encompasses a number of interrelated subjects, including mathematics, probability theory, statistics, finance, economics, and computer science. Historically, actuarial science has used deterministic models in constructing schedules and premiums. Science has undergone revolutionary changes since the 1980s due to the proliferation of high-speed computers and the union of stochastic actuarial models with modern financial theory.

Many universities have undergraduate and graduate degree programs in actuarial science. In 2010, a study published by CareerCast, a job search website, ranked the actuary as the No. 1 job in the United States, and the study used five major job classification criteria: environment, income, employment outlook, physical requirements, and stress. A similar study by US News & World Report in 2006 included actuaries among the top 25 professions that it expects to be in great demand in the future.

History of the Actuarial Science specialization:

Historically, much of the foundations of actuarial theory predate modern financial theory. In the early twentieth century, actuaries were developing many of the techniques that can be found in modern financial theory, but for various historical reasons, these developments have not achieved much recognition.

As a result, actuarial science has evolved along a different path, becoming more reliant on assumptions, in contrast to the risk-free valuation and arbitrage concepts used in modern finance. The difference is not related to the use of historical data and statistical projections of liability cash flows but instead results from the way traditional actuarial methods apply market data to these numbers. For example, one traditional actuarial method suggests that changing the asset allocation mix of investments can change the value of liabilities and assets (by changing the discount rate assumption). This concept is incompatible with financial economics.

The potential of modern financial economics theory to complement existing actuarial science was recognized by actuaries in the mid-20th century. In the late 1980s and early 1990s, there was a distinct effort of actuaries to combine financial theory and stochastic methods into their well-established models, ideas derived from financial economics became increasingly influential in actuarial thinking, and actuarial science began to adopt more complex mathematical models of finance. Today, the profession, both in practice and in the educational curricula of many actuarial organizations, recognizes the need to reflect the combined approach of tables, loss models, stochastic methods and financial theory. However, assumption-based concepts are still widely used (such as determining the discount rate assumption as mentioned earlier), particularly in North America.

Product design adds another dimension to the discussion. Financial economists argue that the benefits of a pension are similar to bonds and should not be funded with equity investments without reflecting the risk of not achieving the expected returns. But some pension products reflect the risk of unexpected returns. In some cases, the pension recipient bears the risks, or the employer bears the risks. The current debate now appears to focus on four principles:

Financial models should be free from arbitrage

Assets and liabilities with similar cash flows must have the same price. This is at odds with FASB

The value of the asset is independent of its financing

The latest release is about how to invest pension assets

Essentially, financial economics states that pension assets should not be invested in stocks for a variety of theoretical and practical reasons.

The importance of studying the specialty of Actuarial Science:

Actuarial science is a discipline that assesses financial risks in the areas of insurance and finance, using mathematical and statistical methods. Actuarial science applies the mathematics of probability and statistics to identify, analyze, and solve the financial implications of uncertain future events. Conventional actuarial science revolves largely around mortality analysis, production of life tables, and the application of compound interest.

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Actuarial science evaluates financial risks in the areas of insurance and finance using mathematical and statistical methods.

Actuarial science applies probability analysis and statistics to identify, analyze and resolve the financial impact of uncertain future events.

Actuarial science helps insurers anticipate the probability of an event to determine the funds needed to pay claims.

Actuarial Science courses:

• Microeconomics
• Introduction to abstract mathematics.
• elements of financial accounting
• Elements of managerial accounting, financial management, and financial institutions
• Mathematical proof and analysis
• Programming for data science

Fields of work for the Actuarial Science major:

Actuaries apply mathematical and statistical techniques to business problems.

Employers: Actuaries work in life insurance, general insurance, consulting Actuarial agencies, investment banks, and government actuaries management.