CM2B – Economic Modelling (Excel)

Course Overview

CM2B focuses on practical modelling skills using Excel, with an emphasis on applying stochastic and statistical methods to realistic financial and insurance problems. It is a hands-on, problem-solving course that translates complex theory into usable, replicable models.

Topics Covered

• Building and simulating stochastic investment models, including Brownian motion and Ornstein-Uhlenbeck processes

• Constructing binomial lattices for option pricing and replicating Black-Scholes calculations in Excel

• Simulating probabilities of ruin in discrete and continuous time using Monte Carlo techniques

• Applying chain ladder, Bornhuetter-Ferguson, and average cost per claim methods to estimate outstanding claims from run-off triangles

• Valuing minimum benefit guarantees and credit derivatives through scenario-based simulations

• Exploring term structure models (Vasicek, Hull-White) and risk-neutral valuation tools through spreadsheet techniques

Course Outcome

CM2B prepares students for the practical assessment component of CM2 by reinforcing how actuarial concepts are implemented in day-to-day analytical tasks. It cultivates spreadsheet fluency, model-building discipline, and actuarial judgement—all core skills for actuaries working in valuation, pricing, or risk modelling teams.