CM1 Actuarial Mathematics for Modelling: IAI Paper Guide

How to prepare Actuarial Mathematics for Modelling

1. Map the syllabus first. List the 21 chapters against the four syllabus blocks and mark your confidence in each. Plan more time for Pricing and reserving, since it has the largest weighting, but do not skip the early chapters.
2. Master interest theory before life contingencies. Be able to move between nominal, effective and force of interest, and between annuity-certain functions, without looking anything up. Practise with timelines drawn for every question.
3. Learn the equation of value as a habit. Write inflows and outflows on a timeline, choose a valuation date, and set PV of income = PV of outgo. Apply it to loans, APR, project appraisal and later to premiums.
4. Learn duration, convexity and immunisation as concepts and calculations. Know Redington's three conditions and be ready to explain in words why they protect against small interest rate changes.
5. Build life contingencies in layers. Start with single-life assurances and annuities, then means and variances, then two lives, then multiple states and decrements. At each layer, write the cashflows and the probabilities before computing.
6. Practise premiums, reserves and profit testing end to end. For each contract type, work from the gross random future loss, to the premium by the equivalence principle, to the reserve, then to death strain, mortality profit and zeroisation for unit-linked contracts.
7. Prepare for Paper B in parallel. Use R or Excel to rebuild the same calculations you do by hand, such as annuity values, reserves and profit vectors. Check your computer answers against hand answers to catch formula errors.
8. Finish with timed past papers. Do a full Paper A under exam conditions, mark yourself strictly, and keep a log of every lost mark with its cause. Revisit the log in the last two weeks.

Time management in the exam

• →Do the multiple-choice questions first if the paper opens with them. At 2 marks each, aim for roughly a couple of minutes per question and flag any that need long working.
• →Allocate time to written questions in proportion to marks. A rough guide is about two minutes per mark in Paper A, which leaves some time for checking.
• →Do not stay stuck on one part. Write the setup, which usually earns marks, and move on. Return if time remains.
• →Draw the timeline or state the assumptions at the start of each written question. This takes seconds and prevents costly timing errors.
• →Keep the last ten minutes or so for checking units, signs and whether your answer is sensible, for example a reserve that should be positive or a probability between 0 and 1.
• →In Paper B, save your work regularly and structure the file so that inputs, such as interest and mortality, are separate from calculations. This makes changes quick and errors easy to find.