GAVIN REID DEPARTMENT OF ACTUARIAL MATHEMATICS & STATISTICS HERIOT-WATT UNIVERSITY, EDINBURGH

WHERE IS HERIOT-WATT UNIVERSITY?

Beautiful Scotland

Edinburgh Castle

Heriot-Watt Campus

6 WHAT ARE WE GOING TO TALK ABOUT? What does a financial risk manager / actuary do? Some sample risk management calculations and questions Postgraduate programmes at Heriot-Watt

7 WHAT DOES A FINANCIAL RISK MANAGER DO?

8 PART SUPER-HERO! PART FORTUNE-TELLER! PART FINANCIAL GURU! PART MATHEMATICIAN!

9 RISK MANAGERS ARE EXPERTS IN: Calculating the chances of future financial events - using numbers, not crystal balls. Designing creative ways to reduce the risk of future negative events. Reducing the impact of any negative events that do occur.

10 THE FUTURE IS UNCERTAIN AND FULL OF RISK. WHAT IS RISK? Risk is the chance that an undesirable event will occur, but risk is also opportunity.

WHAT ARE THE RISKS WE MIGHT NEED TO MANAGE?

12 WHAT DO ACTUARIES DO? ACTUARIES ARE RISK MANAGERS Actuaries solve problems related to complex financial risks using maths and statistics problem solving skills, business knowledge, and understanding of human behaviour Traditionally, actuaries work in insurance and pensions, but are increasingly moving into investment and banking too.

13 YOUR TURN! It’s your turn to be the Risk Manager! Try predicting the future with these sample problems.

14 BACKGROUND: Heriot-Watt Insurance Company (HWIC) insures 1,000 eighteen year old drivers. Assume 300 of the 1,000 will have accidents within a year. Assume the average repair cost for each accident will be £500. CAR INSURANCE PRICING QUESTION: WHAT IS THE MINIMUM PREMIUM THAT HWIC SHOULD CHARGE AN 18-YEAR OLD FOR A 1-YEAR CAR INSURANCE POLICY?

SOLUTION: At a minimum, the total premiums collected must equal the total cost of the accidents. Estimated cost of the accidents: 300 × £500 = £150,000 Minimum premium for each driver: £150,000 ÷ 1,000 = £150 AUTO PRICING 101 CAR INSURANCE PRICING

16 BACKGROUND: Assume 400 of the drivers are males and 600 are females. Assume 200 out of 300 of accidents will involve males, and the remaining 100 accidents will involve females. AUTO PRICING 101 QUESTION: WHAT PREMIUM SHOULD BE CHARGED FOR THE MALES AND THE FEMALES? SHOULD IT BE THE SAME? CAR INSURANCE PRICING

17 SOLUTION: Total males’ premium: 200 accidents × £500 per accident = £100,000 Each male’s premium: £100,000 ÷ 400 males = £250 CAR INSURANCE PRICING

18 SOLUTION: Total males’ premium: 200 accidents × £500 per accident = £100,000 Each male’s premium: £100,000 ÷ 400 males = £250 Total females’ premium: 100 accidents × £500 per accident = £50,000 Each female’s premium: £50,000 ÷ 600 females = £83.33 QUESTION: WHY IN REALITY WOULD WE CHARGE A DIFFERENT PREMIUM FROM THE ONE WE’VE CALCULATED? CAR INSURANCE PRICING

19 OTHER RISK MANAGEMENT PROBLEMS

20 OTHER RISK MANAGEMENT PROBLEMS

21 BACKGROUND: Su Bingtian comes to you and asks for insurance which will pay out £50million if he becomes unfit to compete in athletics in the next three years. QUESTION: HOW WOULD YOU DECIDE WHAT PREMIUM TO CHARGE HIM? WHAT RISKS WOULD YOU CONSIDER? WHAT INFORMATION WOULD YOU NEED AND HOW MIGHT YOU USE IT? OTHER RISK MANAGEMENT PROBLEMS

23 BACKGROUND: The government of a small Pacific island comes to start a fund which will cover the cost of repairing all buildings and infrastructure (e.g. roads) damaged as a result of a natural disaster (e.g. an earthquake). QUESTION: HOW WOULD YOU DECIDE HOW MUCH THE GOVERNMENT SHOULD CONTRIBUTE INTO THE FUND EVERY YEAR? WHAT INFORMATION WOULD YOU NEED AND HOW MIGHT YOU USE IT? OTHER RISK MANAGEMENT PROBLEMS

24 INTERESTED?! Postgraduate MSc programmes at Heriot-Watt

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Quantitative Financial Risk Management MSc Actuarial Science MSc Actuarial Management MSc Actuarial Science & Management (2 year combination of MSc Actuarial Science & MSc Actuarial Management) MSc Quantitative Financial Engineering MSc Financial Mathematics (jointly with Edinburgh University)

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Quantitative Financial Risk Management Suitable for those interested in managing risk in financial organisations e.g. Credit Risk Manager in banking sector Offer exemptions from Professional Risk Managers International Association (PRMIA) examinations: Level I and II. Taught by world-renowned experts in Risk Management

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Quantitative Financial Risk Management

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Quantitative Financial Risk Management Taught by world-renowned experts in Risk Management ‘Special Topics’ course based on real-life practical project work led by industry professionals Opportunity to complete summer project work in industry

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Actuarial Science / MSc Actuarial Management / MSc Actuarial Science & Management Suitable for those interested in becoming actuaries e.g. calculating insurance premiums or pension contributions High starting salaries (average £33,000 in UK) #1 ranked job in the world (Careercast, 2015) One of only a few UK universities to offer exemptions from professional Institute & Faculty of Actuaries examinations

THE PROFESSIONAL UK ACTUARIAL EXAMS Core Technical Stage Subject CT1 Financial Mathematics Subject CT2 Finance & Financial Reporting Subject CT3 Probability & Mathematical Statistics Subject CT4 Models Subject CT5 Contingencies Subject CT6 Statistical Methods Subject CT7 Economics Subject CT8 Financial Economics Subject CT9 Business Awareness Core Applications Stage Subject CA1 Core Applications Concepts Subject CA2 Modelling Module Subject CA3 Communications Specialist Technical (pass 2 subjects) Subject ST1 Health and Care Subject ST2 Life Insurance Subject ST4 Pensions and Other Benefits Subject ST5 Finance and Investment A Subject ST6 Finance and Investment B Subject ST7 General Insurance: Modelling Subject ST8 General Insurance: Pricing Subject ST9 Enterprise Risk Management Specialist Applications (pass 1 subject) Subject SA1 Health and Care Subject SA2 Life Insurance Subject SA3 General Insurance Subject SA4 Pensions & Employee Benefits Subject SA5 Finance Subject SA6 Investment

MSC ACTUARIAL SCIENCE: EXEMPTIONS Core Technical Stage Subject CT1 Financial Mathematics Subject CT2 Finance & Financial Reporting Subject CT3 Probability & Mathematical Statistics Subject CT4 Models Subject CT5 Contingencies Subject CT6 Statistical Methods Subject CT7 Economics Subject CT8 Financial Economics Subject CT9 Business Awareness Core Applications Stage Subject CA1 Core Applications Concepts Subject CA2 Modelling Module Subject CA3 Communications Specialist Technical (pass 2 subjects) Subject ST1 Health and Care Subject ST2 Life Insurance Subject ST4 Pensions and Other Benefits Subject ST5 Finance and Investment A Subject ST6 Finance and Investment B Subject ST7 General Insurance: Modelling Subject ST8 General Insurance: Pricing Subject ST9 Enterprise Risk Management Specialist Applications (pass 1 subject) Subject SA1 Health and Care Subject SA2 Life Insurance Subject SA3 General Insurance Subject SA4 Pensions & Employee Benefits Subject SA5 Finance Subject SA6 Investment

MSC ACTUARIAL MANAGEMENT: EXEMPTIONS Core Technical Stage Subject CT1 Financial Mathematics Subject CT2 Finance & Financial Reporting Subject CT3 Probability & Mathematical Statistics Subject CT4 Models Subject CT5 Contingencies Subject CT6 Statistical Methods Subject CT7 Economics Subject CT8 Financial Economics Subject CT9 Business Awareness Core Applications Stage Subject CA1 Core Applications Concepts Subject CA2 Modelling Module Subject CA3 Communications Specialist Technical (pass 2 subjects) Subject ST1 Health and Care Subject ST2 Life Insurance Subject ST4 Pensions and Other Benefits Subject ST5 Finance and Investment A Subject ST6 Finance and Investment B Subject ST7 General Insurance: Modelling Subject ST8 General Insurance: Pricing Subject ST9 Enterprise Risk Management Specialist Applications (pass 1 subject) Subject SA1 Health and Care Subject SA2 Life Insurance Subject SA3 General Insurance Subject SA4 Pensions & Employee Benefits Subject SA5 Finance Subject SA6 Investment

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Quantitative Financial Engineering Suitable for those interested in asset management and investment banking Focus on formation of structured financial products and derivatives Opportunity to complete summer project work in industry

DEPARTMENT OF ACTUARIAL MATHEMATICS AND STATISTICS MSc Financial Mathematics Suitable for those interested generally in some kind of quantitative role in finance eg insurance, investment banking, fund management Also suitable for those interested in a PhD Jointly offered degree between Heriot-Watt & Edinburgh University: both universities’ names appear on degree certificate Opportunity to complete summer project work in industry

WHY STUDY AT HERIOT-WATT? Edinburgh & Scotland are awesome!

Scottish Glens and Lochs

WHY STUDY AT HERIOT-WATT?

Edinburgh Castle

Calton Hill, Edinburgh

Edinburgh Festival

Edinburgh – Financial Centre

WHERE IS HERIOT-WATT UNIVERSITY?

Edinburgh Campus

Campus Scenes

Campus Scenes: Loch

WHY MSC ACT SCI AT HERIOT-WATT? Edinburgh & Scotland are awesome… …and it doesn’t rain too much – honestly!

WHY MSC ACT SCI AT HERIOT-WATT? Edinburgh & Scotland are awesome! Heriot-Watt’s MSc programmes offer exemptions from professional examinations – IFoA, CERA & PRMIA

WHY MSC ACT SCI AT HERIOT-WATT? Edinburgh & Scotland are awesome! Heriot-Watt’s MSc programmes offer exemptions from professional examinations – IFoA, CERA & PRMIA Heriot-Watt and its Department of Actuarial Mathematics & Statistics was first of its kind in UK and consistently ranked highly.

WHY COME TO HERIOT-WATT?

94% of postgraduate students in the Department of Actuarial Mathematics & Statistics were satisfied with the quality of teaching on their programme. 98% of postgraduate students in the Department of Actuarial Mathematics & Statistics said that staff were good at explaining ideas. (PTES Survey, 2015)

52 WHY COME TO HERIOT-WATT?

WHY MSC ACT SCI AT HERIOT-WATT? Edinburgh & Scotland are awesome! Heriot-Watt’s MSc programmes offer exemptions from professional examinations – IFoA, CERA & PRMIA Heriot-Watt and its Department of Actuarial Mathematics & Statistics was first of its kind in UK and consistently ranked highly. Close links with the actuarial profession with great job prospects Opportunity for summer project/internship in industry

54 WHY COME TO HERIOT-WATT?

WHY MSC ACT SCI AT HERIOT-WATT? Edinburgh & Scotland are awesome! Heriot-Watt’s MSc programmes offer exemptions from professional examinations – IFoA, CERA & PRMIA Heriot-Watt and its Department of Actuarial Mathematics & Statistics was first of its kind in UK and consistently ranked highly. Close links with the actuarial profession with great job prospects Opportunity for summer project/internship in industry Students’ Actuarial Society / Trading & Investment Society

WHY MSC ACT SCI AT HERIOT-WATT?

Edinburgh & Scotland are awesome! Heriot-Watt’s MSc programmes offer exemptions from professional examinations – IFoA, CERA & PRMIA Heriot-Watt and its Department of Actuarial Mathematics & Statistics was first of its kind in UK and consistently ranked highly. Close links with the actuarial profession with great job prospects Opportunity for summer project/internship in industry Students’ Actuarial Society / Trading & Investment Society Taught by experts: actuaries and risk managers Contact hours to guide through material: lectures, tutorials, computer labs

FURTHER INFORMATION Academic entry requirements: Financial Mathematics Previous degree in maths / statistics Business degrees are unlikely to be suitable GPA of around 3.3 (average mark of 82%) with strong marks in mathematical courses

FURTHER INFORMATION Academic entry requirements: other programmes Previous degree should have significant maths/stats content: usually at least 8 relevant courses Engineering & Physics degrees are often suitable as they have ‘analytical’ content While the GPA is useful, the average mark in maths/stats subjects is more important (around %).

FURTHER INFORMATION Academic entry requirements: other programmes Particularly relevant previous degrees/courses (eg BSc Financial Engineering for QFE applicants) are looked on favourably For Actuarial Management, usually 6 Core Technical exemptions are required (implying a previous BSc/MSc Actuarial Science)

FURTHER INFORMATION Academic entry requirements: other programmes We look at every student on an individual basis. Please feel free to send us your transcript if you are interested!

FURTHER INFORMATION Scholarships: ‘Head of School’ scholarship:10% of fees Automatically applies where the offer is accepted before 31 st March 2016 Scholarships: £2,500 - £3,500 each Awarded to outstanding applicants

WHAT ELSE DOES HERIOT-WATT OFFER? A range of MSc programmes in Mathematics, Computer Science, and other disciplines

FURTHER INFORMATION More information and apply online at: Please me with any questions at:

WHAT ELSE DOES HERIOT-WATT OFFER? A range of MSc programmes in Mathematics, Computer Science, and other disciplines

STILL INTERESTED?! Visit us online at: sciences/departments/actuarial-maths-statistics.htm Please me with any questions at:

THANK YOU FOR LISTENING! GAVIN REID HERIOT-WATT UNIVERSITY, EDINBURGH