Actuarial science

Actuarial science studies financial and insurance risks through complex mathematical models and algorithms. These interpret the functioning of the economy through the probability of occurrence of certain events. 

Actuaries are fully aware of the computer and risk management systems, as well as the variables that are included in the financial models and the tests performed under stress situations.

The models have to be realistic and with a very high success rate. In addition, the forms of action must be defined, in case the prognosis fails, and the protocols that allow facing complex situations outside the proposed scenarios.

Therefore, constant analytics and stress tests are fundamental for this science, as well as the investment in technology that allows access to information from complex networks where the models are made up of multiple variables that must be taken into account.

The evolution of actuarial science

Actuarial science needs to be constantly evolving. This, since the market conditions change with the passage of the experiences suffered in times of crisis.

Accessing this information is very difficult, since each financial company develops its own models in order to find the best results that allow them to obtain the greatest benefits.

On the other hand, the models should focus on economic reality and not just based on evidence from the past. Thus, they should anticipate possible future results and situations that may occur in the coming years to cover and provide appropriate provisions.

In addition, the models must be deterministic and quantify the volume of risks with well-defined probability percentages with very low margins of error.

It should also be noted that it is essential to identify the variables that failed in the previous financial crises to include them in the financial models.

Currently, there is a great demand for actuarial experts. This, since companies need professionals with great analytical ability. For this, they require engineers, mathematicians, physicists or economists specialized in branches of quantitative economics. All of them, with great knowledge in the field of analysis of all kinds, especially in the calculation of probabilities of events and risk scenarios.

by Abdullah Sam
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