The University of New South Wales

ACTL 3141/5104 Actuarial Models and Statistics

Mid-Term ExamSession 1, 2017

SOLUTIONS

1
Question 1 [18 marks]

a. [10 marks ]

i. We have
 Z 10 
10 p0 = exp − µx dx
0
 Z 10 
= exp − (0.2 − 0.016x)dx
 0 
0.016 2
= exp −0.2(10) + (10)
2
= 0.3011942 [Marking guide: 4]

ii. We have

10 q10 = 1 −10 p10

 Z 20 
= 1 − exp − µx dx
10
 Z 20 
= 1 − exp − 0.04dx
10
= 1 − exp (−0.04(10))
= 0.32968 [Marking guide: 4]

iii. We have

10|10 q0 = 10 p0 × 10 q10
= 0.301194 × 0.32968
= 0.09929769 [Marking guide: 2]

b. [8 marks ]
In general we have S(t) = e− . [Marking guide: 2]
Rt
0 µx dx

Hence
−0.2t+ 0.016
if 0 ≤ x ≤ 10

t2
e
 2

S(t) = 0.3011942e−0.04(t−10) if 10 ≤ x ≤ 20
if 20 ≤ x ≤ 40
 0.018 2 2
0.3011942(1 − 0.32968)e0.32(t−20)− 2 (t −20 )


[Marking guide: 2 marks per correct expression above, including the range of values.]

2
Question 2 [30 marks]

a. [4 marks ] We have

   
d1 d2 d3
ŜKM (4) = 1− 1− 1−
n1 n2 n3
   
2 1 1
= 1− 1− 1−
12 7 5
= 0.57 [Marking guide: 4 Marks]

b. [4 marks ] This probability corresponds to

ŜKM (3) − ŜKM (6) ŜKM (6) 0.29

=1− =1− = 0.6506
ŜKM (3) ŜKM (3) 0.83

[Marking guide: 2 Marks for the correct theoretical expression and 2 marks for getting
the correct value.]
c. [8 marks ] Using Greenwood's formula (orange book, page 33) we have

 
2 1
2
V ar(S̃KM (3.5)) = (0.71) + = 0.0204 [Marking guide: 4 Marks]
12(12 − 2) 7(7 − 1)
√
The the 95% condence interval becomes 0.71 ± 1.96 0.01964026 which becomes

(0.4353183, 0.9846817) [Marking guide: 4 Marks]

d. [6 marks ] In this case there are some student who will never qualify. [Marking guide: 3
Marks]
It could thus be reasonable to assume that ŜKM (t) stays at at the value observed at
t = 6.5 and never reaches 0. [Marking guide: 3 Marks]
Alternatively, one could assume that after t = 6.5, ŜKM (t) decays exponentially towards
zero.
e. [8 marks ] The transposition of labels between H and L shouldn't have any impact as
both have the same exit time [Marking guide: 2 Marks] .
Individuals M and O are the last two observations, so we would now have that the last
deaths occurs at t6 = 8.5 and n6 = 1 and d6 = 1. Therefore the last column in Table
1 would now be, j = 6, tj = 8.5, nj = 1, dj = 1 and ŜKM (tj ) = 0. [Marking guide: 6
Marks] .

3
Question 3 [23 marks]

a. [4 marks ] The baseline hazard applies to a couple which is not mixed-ethnicity and where
the husband is not African-American and has less than 12 years of education [Marking
guide: 4 Marks]
b. [6 marks ] This is a condence interval on eβ2 . [Marking guide: 1 Mark] .
We know that β2 ∼ N (0.02168, 0.11073). [Marking guide: 1 Mark]
Hence a 95% condence interval for eβ2 is
e0.02168±1.96×0.11073

which becomes

(0.8225461, 1.269611) [Marking guide: 2 Marks]

This interval includes 1 so we can say that there is no statistical dierence in marriage
length between couples of least educated (12< years) and most educated (16+ years)
husbands. [Marking guide: 2 Mark]
c. [4 marks ] We have that

S(4.5; z2 = 1, z3 = 1, z4 = 1) = e−Λ̂0 (4.5) exp(0.02168+0.18292+0.23422)

= 0.970316 [Marking guide: 4 Marks]

d. [9 marks ]

i. [3 marks ] For i. the eect would be none as the parameter estimates are only
dependent on the rank of the deaths and the typo doesn't change this rank. [Marking
guide: 3 Marks]
ii. [3 marks ] Similarly, for ii. the eect would be none as the standard errors are also
only dependent on the rank of the deaths and the typo doesn't change this rank.
[Marking guide: 3 Marks]
iii. [3 marks ] For iii., by contrast, we would have that the survival probability will
change as Breslow's estimator of the baseline cumulative hazard does change with
the the change in the times. In particular Λ̂0 will now be 0.00948 instead of 0.01943.
[Marking guide: 3 Marks]

4
Question 4 [14 marks]

a. [4 marks ]

Model Proportional Hazard Accelerated Failure Time

Cox-regression model YES NO

Weibull life time model YES YES

Exponential life time model YES YES

Log-normal regression model NO YES

[Marking guide: 1 Marks per correct row]

b. [10 marks ] We have

dS(t;X > )
> dt
h(t; X ) = −
S(t; X > )
dS0 (t exp[θX > ])

= − dt
[Marking guide: 3 Marks]
S0 (t exp [θX > ])

Applying the chain rule of dierentiation

dS0 t exp θX >

 

= f0 t exp θX > exp θX > , [Marking guide: 3 Marks]
 
 
−
dt
where f0 is the baseline density function. Now, since h0 (t) = f0 (t)/S0 (t), we have

dS(t;X > )
> dt
h(t; X ) = −
S(t; X > )
f0 t exp θX > t exp θX >
 
 
=
S (t exp [θX > ])
 0> 
= exp θX h0 t exp θX > [Marking guide: 4 Marks]
 

which completes the proof.

5
Question 5 [15 marks]

a. [9 marks ]

i. Right censoring is when we only know that the event of interest has not occurred
before a certain time. Pensioners 1 and 6 are examples of this. [Marking guide: 2
mark for the denition and 1 marks for a correct example]
ii. Left censoring is when we only know that the event of interest has occurred before
a certain time. There are no examples of this in this study. [Marking guide: 2 mark
for the denition and 1 marks for saying that it does not apply to any pensioner in
the study]
iii. Left truncation is when we don't know anything about the event of interest had it
occurred before a certain time. Pensioners 2, 3 and 6 are examples of this. [Marking
guide: 2 mark for the denition and 1 marks for a correct example]

b. [6 marks ] Note that the third column in the table indicates ai for each life and the fourth
column indicates bi for the censored lives. We have then that
dx
q̂70 =
Ex
2
= 7−0 12−2 12−3 9−5
12
+ 12
+ 12
+1+1+ 12
2
= = 0.444444 [Marking guide: 6 Marks]
4.5

End of Paper