Skip to content

IAI Actuarial Core Principles · Risk Modelling and Survival Analysis · Applications of time series models

A time series Y_t is described as ARIMA(1,1,0). Which statement correctly describes the process?

An ARIMA(1,1,0) process is one whose first difference is a stationary AR(1) process. The middle parameter d=1 means one difference is needed to reach stationarity, so the original series is integrated of order one and is non-stationary.

  1. AY_t itself is a stationary AR(1) process
  2. BThe first difference of Y_t is a stationary AR(1) processCorrect
  3. CThe first difference of Y_t is a stationary MA(1) process
  4. DThe second difference of Y_t is a stationary AR(1) process
  5. Y_t is a stationary ARMA(1,1) process

Explanation

In ARIMA(p,d,q), d is the number of differences needed to give a stationary ARMA(p,q) process. Here d=1, p=1, q=0, so the first difference follows a stationary AR(1). Y_t itself is non-stationary because it is integrated of order 1.

Did you get it right without looking?

One question tells you little. A timed set on Applications of time series models shows your real accuracy, how long you take and where you lose marks.

Practise Applications of time series modelsFree diagnostic mock

More Applications of time series models questions