Exam PA (ACTEX Learning)

What are the three main categories of predictive modeling problems?

• Descriptive

• Predictive

• Prescriptive

What is a descriptive type of modeling question?

Focuses on what happened in the past and aims to “describe” or explain the observed patterns by identifying the relationship between different variables in the data.

What is a predictive type of modeling problem?

Focuses on what will happen in the future and is concerned with making accurate “predictions”

What is a prescriptive type of modeling problem?

Uses a combination of optimization and simulation to quantify the impact of different “prescribed” actions in different scenarios

How does predictive analytics play a role in insurance?

Used in ratemaking, a topic that in Exam FAM, that deals with setting premiums, or rates, based on the loss experience and risk characteristics of policyholders.

What is a dataset that can be displayed in the following observation-by-variable rectangular array format called?

Structured data and it’s stored in R as a data frame

What is the variable we’re interested in called?

Target variable

What is Y?

Target variable

What is f(X)?

Systematic part (signal)

What is \in ?

Idiosyncratic part (noise)

What does f stand for?

A fixed (non-random) but unknown function connecting the predictors and the target variable