CONTENTS

Highlights

The Year in Review

Academic Activities

Conference, Seminar & Lecture Presentations

Research Paper Series

Undergraduate & Honours Teaching

Successful Honours Students & Theses Topics

Prize Winners

Staff

Advisory Board

HIGHLIGHTS

• The Centre celebrated ten years of teaching actuarial studies
   
• The Centre produced its 100th Honours graduate
   
• The Centre was accredited by the Institute of Actuaries of Australia for a further four years
   
• Research and postgraduate studies continue to expand
   
• Actuarial students again claim major faculty-wide awards

THE YEAR IN REVIEW

Introduction

The Centre for Actuarial Studies continues to be the focal point for actuarial education in Victoria. It attracts the support of the actuarial profession in Australia and produces quality applied and theoretical research. It also maintains strong international links as well as contributing to the local actuarial community.

Staff news

Ms Hye-Sun Lim joined the Centre from AXA life insurance company as a lecturer in January. Sun holds degrees in statistics and in commerce and is presently an Associate of the Institute of Actuaries of Australia

During the year, Professor Daniel Dufresne accepted an offer of a professorial appointment in the Centre and takes up his position in January 2003.

Mr Edward McEllin completed his coursework and obtained his Fellowship in the Society of Actuaries.

Dr Jun Cai resigned from the Centre at the end of 2001 to take up an appointment as Associate Professor at the University of Waterloo. We wish him well in this new position.

Professor Ross Williams retired as Dean of the Faculty of Economics and Commerce at the end of 2002. Ross has been a member of the Centre's Advisory Board since it was formed and has contributed greatly to the Centre during this period. We wish him a happy retirement.

Research Activities

Research at the Centre during the year was in the areas of investment theory, long term care, life office modelling, general insurance modelling and risk theory.

Manabu Sato became the Centre's first MCom by research graduate, gaining a first class honours mark for his thesis "Initial capital and margins required to secure a Japanese life insurance policy portfolio under stochastic interest rates".

Eddie Leung became the Centre's first full-time PhD student, working on actuarial issues in long term care.

The number of papers in the Centre's Research Paper Series passed the one hundred mark during the year. Full details are given in the Research Paper Series section of this report.

The Centre was a sponsor of the Stochastic Processes and their Applications Conference which was hosted by the Department of Mathematics and Statistics at the university. Greg Taylor was one of the invited speakers at the conference.

Greg Taylor was one of the three invited speakers at the Insurance: Mathematics & Economics Congress in Lisbon 

Teaching Activities

In terms of teaching, 2002 was largely a year of consolidation with no new subjects being taught.

Actuarial Studies continues to be a popular discipline and the number of students taught during the year was significantly greater than in 2001. The honours year is now fully established as part of the actuarial program, with thirty-six students successfully completing this year. This brings the number of honours graduates in actuarial studies to over one hundred since the introduction of honours in 1996.

Teaching activities were again supported by Melbourne actuaries, notably in the form of guest lectures in the subjects Actuarial Practice and Control I and II. These guest lecturers were Mr Andrew Gale of Medibank Private and Mr Richard Cumpston of Cumpston Sarjeant Pty Ltd.  Mr Iain Ross again lectured on actuarial practice in the first-year subject Introduction to Actuarial Studies.

Reviews

An accreditation panel of the Institute of Actuaries of Australia (IAAust) under the chairmanship of Trevor McMahon visited the university in April. The panel reviewed the Centre's subjects and operations and recommended to the IAAust Council that the Centre be accredited for a further period of four years.

The Centre was again fully funded as a Centre of Excellence by the IAAust.

An internal review of the Centre, chaired by Professor Peter Lloyd, took place as part of the university's policy of regular reviews of centres. The review panel noted the achievements of the Centre and the changes in the actuarial program since the previous review. The key recommendation was that staffing levels should increase, with an emphasis on making an appointment at a senior level.

Visitors

Professor Daniel Dufresne, University of Montreal, visited the Centre during the first half of the year. Daniel taught subject 300-408 Advanced Financial Mathematics and contributed to the Centre's research activities.

Dr Zhang Lianzeng from Nankai University, China, visited the Centre for the whole year. Zhang participated in research and taught subject 300-407 Risk Theory II.

Once again the Centre exchanged students with the Department of Actuarial Mathematics and Statistics, Heriot-WattUniversity, hosting two students and sending three. The Centre also hosted a Study Abroad student from the Technical University of Munich.

Professional Activities

Together with the IAAust, the Centre has established a Melbourne Seminar Series. The aim of the series is to provide regular presentations to the Melbourne actuarial community on both actuarial research and continuing professional development topics. As detailed later, presentations were given by David Dickson and Richard Fitzherbert.

Jules Gribble chaired the committee that reviewed the syllabus of Part II of the Institute of Actuaries of Australia's professional qualification.

Ten Year Anniversary

The start of second semester marked the tenth anniversary of actuarial teaching by permanent academic staff at the University of Melbourne. To celebrate this event, the Centre hosted a cocktail reception which was attended by graduates, past and present staff and honours students. Guests were invited to participate in a trivia quiz to test their knowledge of ten years of actuarial studies at the university.

ACADEMIC ACTIVITIES

Publications in Refereed Journals

Chateau, J.P. and Dufresne, D.,The stochastic-volatility American put option of banks' credit line commitments. International Review of Financial Analysis 107,159-181.

Cai, J. and Dickson, D.C.M., On the discounted penalty function at ruin of a surplus process with interest. Insurance: Mathematics & Economics 30, 389-404.

Dickson, D.C.M., A note on the maximum severity of ruin and related problems. Australian Actuarial Journal 8, 239-260.

Dickson, D.C.M. and Waters, H.R., The distribution of the time to ruin in the classical risk model. ASTIN Bulletin 32, 299-313.

Taylor, G.C., Stochastic control of funding systems.  Insurance: Mathematics & Economics 30, 323-350.

Other Publications

Chateau, J.P. and Dufresne, D., Banks' regulatory capital equirement: pricing the credit risk of short-term loan commitments. Proceedings of the Conference: Regulation and Deregulation of Financial Markets, Principality of Liechtenstein, June 2002, 243-262.

Fitzherbert, R.M., The maths teacher and the modern finance expert.  Asset Magazine, February.

Involvement as Referees

During the year, members of the Centre acted as referees for the following journals:

• ASTIN Bulletin
• Australian Actuarial Journal
• Insurance:  Mathematics & Economics
• North American Actuarial Journal
• Scandinavian Actuarial Journal
• Statistics and Probability Letters

Other Activities

David Dickson is an associate editor of Insurance: Mathematics & Economics and of British Actuarial Journal.

David Dickson is Adjunct Professor at the University of Waterloo.

Richard Fitzherbert is an associate editor of Australian Actuarial Journal.

Richard Fitzherbert was the appointed actuary of East Yarra Friendly Society.

Jules Gribble is academic co-ordinator of Managing Regulatory Change in Life Insurance and Pensions Program (APEC Finance Ministers endorsed regional capacity building program), Training Programs and Symposium.

Greg Taylor is an associate editor of Insurance: Mathematics & Economics.

RESEARCH PAPER SERIES

The Centre has an established Research Papers Series and the papers published in 2001 are listed below. Abstracts and electronic forms of papers are available on the World Wide Web

(http://www.economics.unimelb.edu.au/actwww/papers.html)

UNDERGRADUATE & HONOURS TEACHING

The numbers enrolled in each subject for the last three years are shown below.
 

Subject Name	2000	2001	2002
300-101 Introduction to Actuarial Studies	94	84	145
300-203 Financial Mathematics I	117	102	127
300-204 Financial Mathematics II	79	74	97
300-330 Survival Models:  Theory and Applications*	69	81	78
300-331 Modelling in Insurance and Finance I	65	69	67
300-332 Modelling in Insurance and Finance II	52	60	59
300-341 Actuarial Mathematics I*	51	64	60
300-342 Actuarial Mathematics II*	45	65	64
300-400 Actuarial Studies Research Essay	16	24	36
300-406 Risk Theory I*	18	19	34
300-407 Risk Theory II*	18	16	32
300-408 Advanced Financial Mathematics	-	25	34
300-410 The Actuarial Control Cycle I	46	37	45
300-410 The Actuarial Control Cycle I - Distance	11	13	16
300-411 The Actuarial Control Cycle II	31	39	38
300-411 The Actuarial Control Cycle II - Distance	14	6	11
Total Enrolments	726	778	943

The numbers shown for 2000 for subjects marked * refer to enrolments in subjects broadly corresponding to new subjects introduced in 2001.

The Distance students, in centres throughout South East Asia and Australia, received the lectures through cds and video streaming.

SUCCESSFUL HONOURS STUDENTS & THESES TOPICS

The following students successfully completed a Bachelor of Commerce (Honours) with a specialisation in Actuarial Studies:

Ivo Alexis Bench Bloodworth
David James Bruty
Daniel Kevin Burt
Joseph Patrick Byrne
Neil Ch'ng
Rina Christy
Francis Tze Khen Chu
Oui Yau Chuah
Shwu Jiun Foo
Dianna Yuit Ching Foong
Lincoln Thomas Hannah
Richard Russell Henry
David Herman
Henry Chung-Ming Hou
Rakesh Jampala
David Lamm
Hong Yong Leong
Richard Ting Chung Li
Sharon Sen Wah Mak
Taylor Tung-Loi Ng
Phuong Thanh Nguyen
Tzu Lyn Phang
Corey Michael Plover
Lynden Polonsky
Francis Nile Ratnasabapathy
Peter James Raymond
Ching Yen Soh
Ka Sun Tan
Tammy Su Wan Tan
David Vito Velardo
Verra Wijanto
Jaclyn Wing-Huen Wong
Lee Lee Wong 
Mei Ling Wong
Sui San Yeoh

The following list includes topics of honours essays submitted by the students.  An honours research essay is about 10,000 words and counts as 25% of the final assessment for a student's honours grade. 

Systemic risks in derivative clearing systems

Equity returns, bond yields, dividends, and inflation

The valuation of disability income insurance policies in the Australian life insurance market

Option pricing:  valuationof path-dependent options when analytic results are not possible

Investigating mortality change

Issues in small retirement funds

Asian options valuation with stochastic volatility

The importance of value at risk in the context of life insurance in Australia

Comparison of methods for valuing American lookback options

Catastrophe risk securitization with emphasis on valuation of catastrophe call spread using an Asian option approach

Analysis of factors affecting the price of equity indexed annuities

Pricing arithmetic Asian options under constant and stochastic volatility using Monte Carlo methods

Reverse mortgage annuities

Boundary crossing probability for Brownian motion and barrier options

Approximations to the distributions of the severity or ruin and the surplus prior to ruin

A family of fractional age assumptions

Equity indexed annuities:  an assessment of product designs and prospect in a new market - Australia

Upper bounds for the tail of the compound negative binomial distribution

Insurance stochastic models based on shock runs

Analysis of a credit risk model

Valuing equity indexed annuities embedded with barrier options

Australian mortality and the Lee-Carter model

Valuation of equity-indexed annuities with lapse rates depending on stochastic economic factors

PRIZE WINNERS

Actuarial Subject Prizes 

The University of Melbourne Actuarial Foundation Prize
for Modelling in Insurance and Finance I and II
Harry Chun Foong Lee

The AXA Australia Prize
for Financial Mathematics I and II
Sam Killmier

The Colonial Prize
for Introduction to Actuarial Studies
Siang Chin Ng

The NSP Buck Prize
for Survival Models: Theory and Applications
Henry Sunyoto and Kee Leong Lum (equal share)

The NSP Buck Prize
for Actuarial Mathematics I and II
Benjamin Zher Yen Chan and Kee Leong Lum (equal)

The Tillinghast Towers Perrin Prize
for Risk Theory I and II
Hong Yong Leong

The Trowbridge Consulting Prize
for Actuarial Control Cycle I & II
David Lamm
 
Faculty of Economics and Commerce Awards

The A.C. Morley Prize
for the best first year student in the Bachelor of Commerce degree Siang Chin Ng

The Paton Advertising Service Exhibition
for the best student in the second year of the Bachelor of Commerce degree
Han Kee Gan

The J.F. Major Memorial Scholarship
for the best third year student intending to undertake the Bachelor of Commerce Honours degree
Kee Leong Lum

The William Noall & Son Prize
for the top honours graduate in the Faculty of Economics and Commerce
Francis Ratnasabapathy (equal share)

Deutsche Bank Final Year Scholarship
for the best final year student in the Bachelor of Commerce degree or Bachelor of Commerce Honours degree
Benjamin Zher Yen Chan (equal share)

STAFF 

Professor of Actuarial Studies

 David C M Dickson, BSc(Hons), PhD, FFA, FIAA

Senior Lecturers in Actuarial Studies

Richard M. Fitzherbert, BSc (Hons) FIA, FIAA, ASIA

 Lecturers in Actuarial Studies

Edward B McEllin, BA, MA, ASA 
Hye-Sun Lim, BSc, BCom (Hons), AIAA 

Professorial Fellow 

Greg C Taylor, BA, PhD, PhD, FIA, FIAA, FIMA, C Math, AO

Honorary Senior Fellows

Jules Gribble, BSc (Hons), PhD, FIAA, FCIA, FSA

Grant Harslett, BSc (Hons), FIAA, FIA, ASA

Allen Truslove, BSc (Hons), PhD, MBA, FIAA, FIA

Tutors

Benjamin Zher Yen Chan

Andrew Nicholas Downes

Edward Leung, BCom (Hons), LLB (Hons)

Eric Han Soo Lew, BCom (Hons)

Corey Michael Plover

Lynden Polonsky

Peter James Raymond

Mei Ling Wong

Research Student

Edward Leung

Manabu Sato

Administrative Co-ordinator

webmaster

ADVISORY BOARD

The membership of the Advisory Board is as follows.

External Members

Mr Graham Rogers, Offley House

Professor Greg Taylor, Taylor Fry Consulting Actuaries

 University Members

Professor Robert Brown         Department of Finance

Professor David Dickson        Centre for Actuarial Studies

Mr Richard Fitzherbert           Centre for Actuarial Studies

Professor John Freebairn        Department of Economics

Ms Hye-Sun Lim                    Centre for Actuarial Studies

Mr Edward McEllin                 Centre for Actuarial Studies

Professor Ross Williams        (Chair), Dean, Faculty of                                                     Economics and Commerce