SOA Exam SRM Sample Question 55
Study guide: Exam SRM
You are given the following eight observations from a time series that follows a random walk model:
Time (t) |
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|---|
Observation (y_t) |
3 | 5 | 7 | 8 | 12 | 15 | 21 | 22 |
You plan to fit this model to the first five observations and then evaluate it against the last three observations using one-step forecast residuals. The estimated mean of the white noise process is 2.25.
Let F be the mean error (ME) of the three predicted observations.
Let G be the mean square error (MSE) of the three predicted observations.
Calculate the absolute difference between F and G, |F - G|.
- A) 3.48
- B) 4.31
- C) 5.54
- D) 6.47
- E) 7.63
Answer this question and see the worked solution