Introduction to Actuarial CM2: History, Exemptions, Links & Syllabus

Actuarial CM2 syllabus, CM2 excel practice workbook solutions-min

Background of CM2 Actuarial

History

The Actuarial Mathematics subjects (Subjects Actuarial CM1 and Actuarial CM2) are new subjects in the Institute and Faculty of Actuaries 2019 Curriculum.
Subject CM2 is Financial Engineering and Loss Reserving.

Predecessors

The topics covered in the Actuarial Mathematics subjects (Subjects CM1 and CM2 in Actuary) cover content previously in Subjects CT1, CT5, CT8 and a small amount from Subjects CT4, CT6 and CT7:

  1. Subject CM1 contains material from Subjects CT1, CT4 and CT5.

Subject CM2 contains material from Subjects CT8, CT6, CT1 and CT7.

Exemptions

You will need to have passed or been granted an exemption from Subject CT8 to be eligible for a pass in Subject CM2 during the transition process.

Links to other subjects

Concepts introduced in the following subjects are used in Subject CM2:

  • CS1 Actuary – Actuarial Statistics 1
  • CS2 Actuary – Risk Modelling and Survival Analysis
  • CM1 Actuary – Actuarial Mathematics 1
  • CB2 Actuary – Business Economics.

Topics in Subject CM2 are further built upon in the following subjects:

  • Subject CP1 – Actuarial Practice
  • CP2 – Modelling Practice
  • SP5 – Investment and Finance Principles
  • SP6 – Financial Derivatives Principles
  • SP9 – Enterprise Risk Management Principles.

Actuarial CM2 Syllabus & Core Reading

CM2 Actuary Syllabus

To the right of each objective are the chapter numbers in which the objective is covered in the ActEd course.

Aim

The aim of the Financial Engineering and Loss Reserving subject is to provide a grounding in the principles of modelling as applied to actuarial work – focusing particularly on stochastic asset liability models and the valuation of financial derivatives. These skills are also required to communicate with other financial professionals and to critically evaluate modern financial theories.

Competences

On successful completion of this subject, a student will be able to:

  1. describe, interpret and discuss the theories on the behaviour of financial markets.
  2. discuss the advantages and disadvantages of different measures of investment risk.
  3. describe, construct, interpret and discuss the models underlying asset valuations.
  4. describe, construct, interpret and discuss the models underlying liability valuations.
  5. describe, construct, interpret and discuss the models underlying option pricing.

CM2 Syllabus topics

  1. Theories of financial market behaviour (15%)
  2. Measures of investment risk (15%)
  3. Stochastic investment return models (10%)
  4. Asset valuations (20%)
  5. Liability valuations (20%)
  6. Option theory (20%)

The weightings are indicative of the approximate balance of the assessment of this subject between the main syllabus topics, averaged over a number of examination sessions.

The weightings also have a correspondence with the amount of learning material underlying each syllabus topic. However, this will also reflect aspects such as:

  • the relative complexity of each topic, and hence the amount of explanation and support required for it
  • the need to provide thorough foundation understanding on which to build the other objectives
  • the extent of prior knowledge which is expected
  • the degree to which each topic area is more knowledge or application based.

If you want to have a look at the type of excel sheets you may get in exam, follow this link. If you have any queries, feel free to drop them here.

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