CAS Exam 8 Fall 2017, Question 4
Study guide: Exam 8
An actuary has split data into training and test groups for a model. The chart below shows the relationship between model performance and model complexity. Model performance is represented by model error and model complexity is represented by degrees of freedom.
Part a (0.5 points)
Briefly describe two reasons for splitting modeling data into training and test groups.
Part b (0.75 points)
Briefly describe whether each of the following model iterations has an optimal balance of complexity and performance.
- i. Model iteration 1: 10 degrees of freedom
- ii. Model iteration 2: 60 degrees of freedom
- iii. Model iteration 3: 100 degrees of freedom
Part c (0.5 points)
Identify and briefly describe one situation where it is an advantage to split the data by time rather than by random assignment.
Answer this question and see the worked solution