Derive and apply two-term and three-term Woolhouse approximations for calculating expected present values of state-dependent cash flows.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Premium and Policy Valuation for Long-Term Coverages. 14 min read, ~2,143 words.
Two-term Woolhouse:. Three-term adds. Three-term needs at the starting age, plus the force of interest. For: the coefficients are and. Temporary annuity rule:. Multi-state extension: replace with the total force of leaving the paying state,. Continuous limit: as,. Use 3-term when and you need EPVs accurate to the nearest cent...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 2b
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