Means, Variances, and Covariances of Present Value Random Variables

Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Present Value Random Variables for Long-Term Insurance Coverages. 7 min read, ~1,098 words.

(annual); (continuous). Variance: where = same mortality, double the force of interest. Annuity variance = insurance variance / (due) or (continuous). UDD approximation:; ratio is always 1. Covariance of insurance and annuity PVs is always negative, natural hedge.