Stochastic Time Series Concepts

Free SOA Exam SRM (Statistics for Risk Modeling) lesson in Time Series Models. 17 min read, ~2,600 words.

A stochastic time series decomposes into trend, seasonality, cyclical, and irregular (noise) components. Most modeling work is isolating each piece. Weak (covariance) stationarity requires constant mean, constant variance, and autocovariance that depends only on lag, not on absolute time. This is the workhorse exam definition. White noise has mean 0...