Actuarial Science

What is Actuarial Science?

Actuarial Science is a science that uses mathematics and statistics in the field of finance and insurance to assess the risk involved. The uncertainty of future events and its financial implications are analyzed by the application of mathematics and statistics which is its prime focus.

What Does an Actuary Do?

Actuarial Science

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Example of Actuarial Science

The current epidemic of the Corona Virus is not only a blow to the Chinese market but also the global economy since China is the world’s largest exporter of raw materials. This is something that actuaries could not gauge, and hence, businesses across the globe have taken the hit. In such a scenario, the internal numbers of the business might not play a major role since it is the external factor that is causing the slowdown. Moreover, businesses cannot hedge for such instances where there is an epidemic outbreak, thereby stalling global progress.

Importance of Actuarial Science

  • It is a proven method of understanding the current scenarios and identifying potential risks that can cause damage to the business.
  • The extensive study of actuarial science and standardization of the analysis enables an actuary to adopt a problem-solving approach.
  • Risk management is the most important facet of actuarial science, and business invests their time and money for the best actuarial advisors.
  • The conclusion derived based on the application of actuarial science facilitates businesses to arrive at the best decisions that ensure the smooth functioning of businesses even at the time of unforeseen incidents.

Applications

Advantages of Being an Actuary

Limitations of Being an Actuary

  • Decisions are made based on calculations and their outcomes. These are assumptions made based on the current situations, which can change, and the outcomes can be wrong as time progresses.
  • An actuary needs to stay updated on the current market conditions and be aware of topics that are interrelated to the business so that any anomalies can be identified for arriving at the apt decision for the business.
  • Mathematics and statistics are the foundation subjects of the profession of Actuarial sciences. So a person who is not good with numbers cannot thrive in the role.

Conclusion

Actuarial science is about applying mathematical, statistical, and business skills to measure and manage risk. The primary focus of an actuary is to analyze the business and identify any underlying risk which can be foreseen so that necessary controls can be put in place to combat the after-effects if the risk event were to happen for real. In today’s world, the need for actuaries has increased, and as a result, more and more universities have introduced courses specializing in the study and discipline of actuarial science. These courses facilitate in creating a solid foundation of mathematics, finance products, economics, and statistics. As a result, an actuary is well versed in finance, economics, and mathematics as a whole.

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