M.Sc./M.A.

Statistics (Actuarial)

PREAMBLE

Actuarial science is the discipline that applies mathematical and statistical methods to
assess risk in the insurance and finance industries. It also includes probability and
economics. Using appropriate Stochastic Models, simulation and high speed computing
facilities it has become possible to construct various tables and determine the premiums
of different types of insurance contracts, even in the presence of uncertainties prevailing
to the risk factors. In such a decision making process, statistical techniques play a central
role. A strong statistical background provides a good foundation for the integrated
aspects of finance, economics, risk management and insurance.

A post graduate statistics course oriented towards Actuarial Statistics is not

available in many educational institutes in India. Expertise in Actuarial Statistics is
globally appreciated and provides opportunities for employment in financial sector.
Graduates in Statistics with adequate background in actuarial science are in greater
demand globally.

The proposed M.Sc./M.A. Statistics (Actuarial) course of the Central University

of Rajasthan is expected to provide basic concepts of statistics, mathematics, insurance
and help in acquiring analytical skills to pursue a profession in financial sector.

Objectives of M.Sc. / M.A. Statistics (Actuarial)

Keeping in view the greater scope for students and the need for statistical expertise in
financial sector, the Central University of Rajasthan proposes to launch a ‘M.Sc. / M.A.
Statistics (Actuarial)’ program from August 2009 with following objectives.

1. To impart the essential knowledge and train the students to be eligible of work in
various insurance organizations and finance sectors.
2. To equip the students to appear for various examinations conducted by the
actuarial societies in India and abroad and thus help them to pursue the actuarial
profession.

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Courses Offered

Semester I (Credits 23)

MSTA101 Financial Mathematics – 4

MSTA102 Probability and Probability Distributions - 4

MSTA103 Principles of Insurance - 2

MSTA104 Introduction to Economics - 4

MSTA105 Statistical Inference - 4

MSTA106 Practical I - 2

MSTA107 Seminar - 1

MSTA108 Dynamics of Communication Skills – 2

Semester II (Credits -21)

MSTA201: Regression Theory - 4

MSTA202: Life Contingencies I (Include part of demography) - 4

MSTA203: Stochastic Processes - 4

MSTA204: Data Mining Techniques - 3

MSTA205: Statistical Applications to Non-Life Insurance - 3

MSTA206: Practical II - 2

MSTA207: Seminar - 1

Semester III (Credits - 22)

MSTA301: Finance and Financial Reporting - 4

MSTA302: Time series and Forecasting - 4

MSTA303: Life Contingencies II - 4

MSTA304: Financial Economics - 4

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 MSTA305: Elective I - 3

MSTA306: Practical III - 2

MSTA307: Seminar - 1

Semester IV (Credits 24)

MSTA401: Survival Analysis - 3

MSTA402: Finance and Investments - 4

MSTA403: Elective I - 3

MSTA404: Elective II - 3

MSTA405: Project (preferably in insurance companies) - 8

MSTA406: Practical IV - 2

MSTA407: Seminar - 1

List of electives (3 credits each)

General Insurance

Risk Management

Life Insurance

Health Insurance

Pension Funds

Neural Network, Fuzzy Logic and other Computer Aided Techniques for
Insurance

Information Theory and Pattern Recognition Techniques (Huda, Shapiro and Jain)

Courses offered by other departments/institutions and approved by the

Departmental Committee.

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 Scheme of M.Sc./M.A. Statistics (Actuarial)
Course Structure

First Semester

S. Subjec Course Title Cour Cr Contact EoS Exam. Relative

No. t Code se edi Hours Duration (Hrs.) Weights %
Cate t L T P Theory Practic I S EoSE
gory * al A T
s
1. MSTA Financial PC 4 3 1 0 3 0 2 3 50
101 Mathematic 0 0
s
2. MSTA Probability PC 4 3 1 0 3 0 2 3 50
102 and 0 0
Probability
Distribution
3. MSTA Principles PC 2 2 0 0 3 0 2 3 50
103 of Insurance 0 0
4. MSTA Introduction PC 4 3 1 0 3 0 2 3 50
104 to 0 0
Economics
5. MSTA Statistical PC 4 3 1 0 2 0 2 3 50
105 Inference 0 0
6. MSTA Practical I PC 2 0 0 6 0 3 2 3 50
106 0 0
7. MSTA Seminar PC 1 - - - - - 1 - -
107 0
0
8 MST Dynamics PE* 2 1 1 0 1 0 2 3 50***
A 108 of * 0 0
Communic
ation Skill
Tota 23 1 5 6
l 6

Note:-
If an admitted student is found to be lacking in the requirement of background of some
core courses he/she shall have to take an appropriate bridge course recommended by the
departmental committee and complete it satisfactorily
* For practicals, one credit is equal to three hours of lab work
** MAS 108 is not a Core but a Compulsory Elective
***1 hour theory and viva voce each comprising 25 marks

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 Second Semester

S. Subjec Course Title Course Credi Contact EoS Exam. Relative

No t Code Catego t Hours Duration (Hrs.) Weights %
. ry L T P Theor Practic IA ST EoS
y al s E
1. MSTA Regression PC 4 3 1 0 3 0 20 30 50
201 Theory

2. MSTA Life PC 4 3 1 0 3 0 20 30 50
202 Contingencie
sI

3. MSTA Stochastic PC 4 3 1 0 3 0 20 30 50
203 Processes I

4. MSTA Data Mining PC 3 2 1 0 3 0 20 30 50

204 Techniques
5. MSTA Statistical PC 3 0 0 6 - 3 20 30 50
205 Applications
to Non-Life
Insurance
6. MSTA Practical II PC 2 0 0 6 2 3 20 30 50
206
7. MSTA Seminar PC 1 0 0 - - - 10 0 0
207 0
Total 21 1 4 1
1 2

20
 Third Semester

S. Subject Course Title Course Credit Contact EoS Exam. Relative Weights
No. Code Category Hours Duration (Hrs.) %
L T P Theory Practical IA STs EoSE
1. MSTA Finance and PC 4 3 1 0 3 0 20 30 50
301 Financial
Reporting
2. MSTA Time Series PC 4 3 1 0 3 0 20 30 50
302 and
Forecasting
3. MSTA Life PC 4 3 1 0 3 0 20 30 50
303 Contingencies
II
4. MSTA Financial PC 4 3 1 0 3 0 20 30 50
304 Economics
5. MSTA Elective I PE 3 2 1 0 3 0 20 30 50
305
6. MSTA Practical III PC 2 0 0 6 - 3 20 30 50
306
7. MSTA Seminar PC 1 0 0 - - - 100 0 0
307
Total 22 14 5 6

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 Forth Semester

S. Subject Course Course Credit Contact EoS Exam. Relative Weights

No. Code Title Category Hours Duration (Hrs.) %
L T P Theory Practical IA STs EoSE
1. MSTA Survival PC 3 2 1 0 3 0 20 30 50
401 Analysis
2. MSTA Finance PC 4 3 1 0 3 0 20 30 50
402 and
Investment
3. MSTA Elective I PE 3 2 1 0 3 0 20 30 50
403
4. MSTA Elective II PE 3 2 1 0 3 0 20 30 50
404
5. MSTA Projects PC 8 - - - - - 50 - 50
405 (Preferably
in
Insurance
Companies)
6. MSTA Practical IV PE 2 0 0 6 3 0 20 30 50
406
7. MSTA Seminar PC 1 0 0 0 - - 100 0 0
407
Total 24 9 4 6

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 Detailed Syllabus of
M.Sc./M.A. Statistics (Actuarial)- Semester I

Note: Numbers in the bracket indicate the number of lecture hours (60 minutes) allotted
to the topic

MSTA 101: Financial Mathematics (Credits 4)

1. Calculus (limits, continuity, differentiability, series, integration). (6)
2. Compound interest theory, discounting and present value of future payments,
interest rates and discount rates at different periods of time, force of interest,
accumulated value of a stream of equal or unequal payments. (8)
3 Annuities certain, discrete (due and immediate) and continuous, with and without
deferment, with monthly payments. (12)
4 Concept of equation of a value, repayment of loan, investment project appraisal. (6)
5 Variable interest rates (3)
6 Investment and risk characteristics of various types of assets such as bonds, shares
and other types of equity finance, options and derivatives. (10)
7 Concept of arbitrage and hedging. (6)
8 Understanding of the term structure of interest rates. (6)

Total lectures 56

Reference Books:

1) Donald D.W.A. (1984). Compound Interest & Annuities Certain. Published for
the Institute of Actuaries and the Faculty of Actuaries, London.
2) Dixit S. P., Modi C.S. and Joshi R.V. (2000). Mathematical Basis of Life
Assurance. Published by Insurance Institute of India, Bombay.
3) McCutcheen, J.J. and Scott, W.F. (1989). Financial Mathematics. Butterworth-
Heinemann.
4) Hull, J. C., (2003). Derivatives Options & Futures, Pearson Education.

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MSTA 102: Probability and Probability Distributions (Credits 4)

1. Exploratory data analysis: summary statistics, box and whisker plots, histogram, P-P
and Q-Q plots (6)
2. Random Experiment and its sample space, probability as a set function on a
collection of events, stating basic axioms, random variables, c.d.f., p.d.f., p.m.f.,
absolutely continuous and discrete distributions, Some common distributions
(Negative Binomial, Pareto, lognormal, beta, etc). Transformations, moments, m.g.f.,
p.g.f., quantiles and symmetry. Random vectors, Joint distributions, copula, joint
m.g.f. mixed moments, variance covariance matrix. (20)
3. Independence, sums of independent random variables, conditional expectation and
variances, compound distributions, prior and posterior distribution, best predictors.
(8)
4. Sampling distributions of statistics from univariate normal random samples, chi-
square, t and F distributions. (6)
5. Order statistics and the distribution of rth order statistic, joint distribution of rth and sth
order statistics. (6)
6. Statement and application of central limit theorem for a sequence of independent and
identically distributed random variables. (4)
7. Simulation techniques such as Monte Carlo, Resampling techniques. (6)

Total lectures 56

Reference Books:

1. Ross, Sheldon M. (2003) Introductory Statistics

2. Hogg, R. V. and Craig, T. T. (1978) Introduction to Mathematical Statistics (Fourth
Edition) (Collier-McMillan)
3. Rohatgi, V. K. (1988) Introduction to Probability Theory and Mathematical
Statistics (Wiley Eastern)
4. C. R. Rao (1995) Linear Statistical Inference and Its Applications (Wiley
Eastern) Second Edition
5. H, Cramer (1946) Mathematical Methods of Statistics,( Prinecton).
6. J. D. Gibbons & S. Chakraborti (1992) Nonparametric statistical Inference
(Third Edition) Marcel Dekker, New York

24
MSTA 103: Principles of Insurance (Credits 2)

1. General principles of insurance, Insurance as a risk mitigation tool (4)

2. Types of life insurance (whole life, term, endowment, annuities), ULIPS. (8)
3. Types of general insurance (motor, marine, fire, miscellaneous) .(6)
4. Health insurance, Micro insurance, Introduction to mutual funds and pension
funds.(2)
5. Fundamental of Pricing, Under-writing, Claims management (4)
6. Introduction to Insurance Laws, Solvency Norms, Ratings and Regulations.(4)

Total lectures:
28

Reference Books:

Black& Skipper, Life and health insurance

MSTA 104: Introduction to Economics (Credits 4)

1. Utility theory, Utility function, Risk aversion, Demand and Supply; Elasticity and
its calculation. (7)
2. Dominance and its various types, its applications to insurance problems. (8)
3. Production, Cost (Long run, Average, etc) and Revenue, Profit Optimization. (8)
4. Different types of financial markets, instruments. (3)
5. Pricing and equilibrium under various markets, competitive firm. (8)
6. Introduction to Macro aggregates (GDP, per Capita income, inflation) and its
relevance to Insurance (8)
7. Fiscal and monetary policies. (6)
8. International Economics relevant to insurance. (8)

Total lectures 56

Reference Books:

1. Begg, D., Ficher, S. and Dornbusch,R.(2005). Economics McGraw Hill.

2. Pyndick &, Rubin (xxx) Micro Economics,
3. Kahn (xxx) Finical Institutions and Markets
4. Samuelson & Nordhus (xxx)

25
MSTA 105: Statistical Inference (Credits 4)

1. Sufficiency, Unbiasedness, Efficiency, Consistency. (6)

2. Methods of estimation (MLE, LSE, MME) Mean square error. Asymptotic properties
of maximum likelihood estimator. (8)
3. Testing of hypotheses – null & alternative hypotheses, simple & composite
hypothesis, type I and type II errors, test statistic, critical region, level of significance,
power of a test. (10)
4. Basic tests for the one sample and two sample situations involving normal, binomial
and Poisson distributions, tests for paired data, chi-square tests for goodness of fit,
contingency table and chi-square test for independence of two classification criteria.
(16)
5. Elements of decision theory, optimum strategies under the theory of games, decision
function, loss function, quadratic and other common loss functions, risk function,
decision criteria such as minimax criterion and Bayes criterion. Bayesian estimation,
conjugate prior distributions. Bayesian HPD confidence intervals. (16)

Total lectures
56

Reference Books:

1. Kale, B.K. (200*) A First Course on Parametric Inference (Narosa)

2. Casella and Berger
3. Dudewicz, E. J. and Mishra, S.N. (1988) Modern Mathematical Statistics (John
Wiley)
4. Roussas, G. G. (1973) First Course in Mathematical Statistics (Addison
5. Wesley)
6. Lehmann, E. L. (1986) Testing of Statistical hypothesis (John Wiley)
7. Lehmann, E. L. (1988) Theory of Point Estimation (John Wiley)
8. Rohatgi, V. K. Ed Saleh (20**) Introduction to theory of probability and
Mathematical
9. Statistics (John Wiley & Sons)

MSTA 106: Practical I (2 credits)

1. Exploratory Data Analysis using Excel, R, Minitab, Systat

2. Practicals related to topics covered in the semester.
3. Practicals related to simulations and model sampling.

MSTA 107 Seminar (1 credit)

26
MSTA108: Dynamics of Communicat ion Skills (Credits 2)

1. Letters & Resume Writing: Memos Letters of enquiry, cover, complaints,

adjustments, sales
2. Resume, writing along with letter of application. (3 Lectures)
3. Presentation Skills: Types of presentation, audience recognition, preparing
presentations: developing presentation, skills for seminar, report presentation. (3
Lectures)
4. Interview Skills: Types of interviews preparing for interviews, about the organization
etc. FAQs; Mock interview drills. (3 Lectures)
5. Group Discussion: Developing group communication skills through GD, case studies
and role-play. (3 Lectures)
6. Vocabulary Building: Usage and origin of words. (3 Lectures)

Suggested Tutorials (1 hour each)

1. Introduction to the Sounds of English- Vowels, Diphthongs & Consonants.

2. Introduction to Stress and Intonation.
3. Situational Dialogues / Role Play.
4. Oral Presentations- Prepared and Extempore.
5. 'Just A Minute' Sessions (JAM).
6. Describing Objects / Situations / People.
7. Information Transfer
8. Debate
9. Telephoning Skills.
10. Giving Directions

Total lectures
25

Reference Books:
Gerson, J. Sharori Technical writing, process and product, Pearson Education Reprint
2004
Betty Kirkpatrick: The concise Oxford Thesaurus. OUP, 24th Impression 2003.

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 Semester Ii

MSTA 201: Regression Theory (Credit 4)

1. Simple regression model with one independent variable(X), assumptions, Estimation

of the regression function, standard error of estimator, testing of hypothesis about
regression parameters, coefficient of determination & its use to measure the goodness
of fit of a linear regression model, prediction of response with confidence limits. (8)

2. Diagnostic checks for suitability and validity of a linear regression model, graphical
techniques, tests for normality, uncorrelatedness, homoscedasticity, lack of fit,
modifications like polynomial regression, transformations on Y or X, WLS. (8)

3. Multiple regression model, Standard Gauss Markov Setup, Least square(LS)

estimation. (8)

4. ANOVA, one-way and two-way analysis of variance. (6)

5. Fundamental concepts of generalized Linear model (GLM), exponential family of
distributions, link functions such as Logit, Probit, Poisson, binomial, inverse
binomial, inverse Gaussian, gamma. (12)
6. Concepts of deviance, Pearson & deviance residuals, statistical tests for acceptability
of a fitted model, Pearson’s chi-square test and the likelihood ratio test. (8)
7. Logistic Regression (6)

Total lectures 56

Reference Books:

1. Draper, N. R. & Smith, H(1998) Applied Regression Analysis, 3rd Ed. (John
Wiley).Dobson, A.
2. McCullagh, P & Nelder, J. A. (1989) Generalized Linear Models (Chapman &
Hall).
3. Ratkowsky, D.A. (1983) Nonlinear Regression Modelling (Marcel Dekker ).
Hosmer, D.W. & Lemeshow, S. (1989) Applied Logistic Regression (John Wiley).
4. Seber, G.E.F. and Wild, C.J. (1989) Nonlinear Regression (Wiley)
5. Neter, J., Wasserman, W., Kutner,M.H. (1985) Applied Linear Statistical
Models. (Richard D. Irwin).
6. Montgomery, Douglas C.; Peck, Elizabeth A.; Vining, G. Geoffrey: (2003)
Introduction to Linear Regression Analysis. (Wiley)

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MSTA 202: Life Contingencies I (Credits 4)

1. Feasibility of Insurance business using utility function. (3)

2. Future life time random variable, its distribution function and density function, concept
of force of mortality, curtate future life time random variable its probability mass
function, deferred probabilities, all these functions in terms of international actuarial
notation (10)

3 analytical laws of mortality such as Gompertz and Makeham Crude birth and death
rates, age specific death rates, tests of crude estimates for consistency with the standard
table. (10)

4. Single decrement life table, select and ultimate life table. (4)

5. Assurance (whole life, term, pure endowment and endowment) and annuity contracts
(whole life annuity, temporary life annuity, life and certain annuity) with level and
varying benefits, formulae for the means and variances of the present value random
variables of the payments under these contracts under the assumption of constant force of
interest, in discrete and continuous set up. (12)

6. Net premiums for insurance products and annuity schemes defined in 5, gross
premiums. (8)

7. Census, Population life tables, Population projection and its main determinants,
component method of population projection. (9)

Total lectures 56

Reference Books:

1. Deshmukh, S.R. (2009) Actuarial Statistics: An Introduction using R. Universities

Press, India.
2. Bowers, JR. N.L., Gerber, H.U., Hickman, J.C., Jones, D.A. and Nesbitt, C.J. (1997).
Actuarial Mathematics, Second Edition, The Society of Actuaries. Sahaumburg,
Illinois.
3. Harriett, E.J. and Dani, L.L.(1999).Principles of Insurance: Life, Health, and
Annuities, Second Edition, Life Office Management Association, Inc. Atlanta,
Georgia.
4. Neill, Alistair (1977). Life Contingencies, The Institute of Actuaries, London.

29
5. Pollard J.H. Mathematical models for the growth of Human Populations
6. Spiegelman M. Introduction to Demography.

MSTA 203: Stochastic Processes (Credits 4)

1. Concept of stochastic process, their classification into different types. (4)

2. Markov chains with stationary transition probabilities, properties of transition
probabilities,
classification of states, Markov chain as a tool for modeling, simulation of Markov
chain.
Stationary distribution and its interpretation (18)
3. Estimation of transition probabilities with suitable examples. (4)
4 Markov pure jump processes, Poisson process, compound Poisson process, Birth and
Death
processes. (10)
5. Finite state continuous time Markov chains. Maximum likelihood estimation of
transition
intensities, renewal processes. (12)
6. Introduction to Wiener Process and Brownian motion. (6)

Total lectures 54

Reference Books:

1 Taylor, H. M. and Karlin, S. (1984) An Introduction to Stochastic

Modelling. (Academic Press)
2 Medhi, J. (1982) Stochastic Processes (Wiley Eastern Ltd.)
3 Ross, S. (2000) Introduction to Probability Models (7th Ed.) Academic Press
4 Bhat B.R. (2000) Stochastic Models: Analysis and Applications (New Age
Internationals)
5 Feller, W. (1972) An Introduction to Probability Theory and its
Applications, Vol.1 3rd rd. (Wiley Eastern Ltd.)
6 Karlin, S & Taylor, H. M. (1969),A First Course in Stochastic Processes
(Second.Edition) (Academic Press)
7 Hoel, P. G. Port, S.C. & Stone, C. J. (1972) Introduction to Stochastic
Processes (Houghton Mifflin)

MSTA 204: Data Mining Techniques (Credits 3)

1. Introduction to Data basis, including sample relational databases; data warehouses

and introduction to online analytical data processing. (8)

30
 2. Association rules and prediction; data attributes, applications to electronic
commerce (6)
3. Data Generalization and Summarization-Based Characterization
Analytical Characterization: Analysis of Attribute Relevance
Mining Class Comparison: Discriminating Between Different Classes
Mining Descriptive Statistical Measures in large Databases
Classification methods, classification and decision trees, clustering methods from
statistical and data mining view point (12)
4. Artificial Neural Network, Support Vector Machines, Techniques for handling large
data bases

Reference Books:
Han and Kamber (2001) Data Mining: Concepts and Techniques, Elsevier

MSTA 205: Statistical Applications to Non-Life Insurance (Credits 3)

1. Non-life insurance

2. Concepts of exposure, severity, frequency, rating and risk factors

3. Reinsurance, rating and risk factors

4. Risk premium , reinsurance, Net and gross premium calculations .

5. Distributions of claims size and amounts, incurred claims, chain ladder method etc.

6. Laws related to non-life insurance business.

7. Concepts of financial statements of non-life insurance companies.

Total Lecture: 42

Reference Books:
Hossack & Pollard Zehnwith, Introductory Statistics with Applications in general
Insurance, Cambridge University press
Mikosch, Thomas (200*) Nonlife Insurance Mathematics An Introduction with
Stochastic Process, Springer

MSTA206: Practical II (2 credits)

Practicals related to topics covered in the semester.

MSTA 207: Seminar (1 credit)

31