Exam MAS-II Practice Question 20
Study guide: Exam MAS-II
An actuary builds a double lift chart on holdout data to compare a proposed model with the current rating plan. The sort ratio is (proposed model predicted loss cost) / (current plan predicted loss cost), the data are bucketed into deciles, and each quantity is divided by its overall average. The first and last deciles are:
| Decile | Proposed model | Current plan | Actual |
|---|---|---|---|
| 1 | 0.75 | 0.98 | 0.72 |
| 10 | 1.12 | 0.96 | 1.35 |
Which of the following conclusions is best supported?
- A) Decile 1 holds the risks the proposed model rates best relative to the current plan, and the actuals there bear the proposed model out
- B) The current plan is better, because its predictions stay close to 1.00 across the deciles and are therefore more stable
- C) Decile 1 holds the risks with the lowest predicted loss cost under the proposed model, so it shows that model's best risks
- D) Neither model can be judged, because the two models' predictions differ in the deciles being compared
- E) The proposed model over-predicts the worst risks in decile 10, so the current plan is the more accurate there
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