Actuarial science is a discipline that helps in assessing financial risks in the field of insurance and finance. It is done so by mathematical and statistical methods. Actuarial science makes use of the mathematics of probability and statistics to understand, analyze, and solve the implications of some uncertain or unforeseen future events. Typical actuarial science revolves largely around the analysis of mortality and the production of life tables, and the application of compound interest.
It attempts to quantify the risk of an event that has occurred or might occur using probability analysis so that the financial impact of the same can be determined. It is generally used in the insurance industry by actuaries that analyze mathematical models for predicting or forecasting the plausibility of an event occurring so that an insurance company can allocate funds to pay out any claims that might result from the event. For example, studying the mortality rates of individuals that come at a certain age can help insurance companies understand the likelihood or timeframe of paying a life insurance policy.
Actuarial science was considered a formal mathematical discipline only in the late 17th century with the rising demand for long-term insurance coverage. It spans several interrelated subjects, which include mathematics, statistics, finance, economics, computer science, and probability theory.
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