ACTL2102 Foundations of Actuarial Models - 2020

Term 2
6 Units of Credit
Risk & Actuarial Studies
The course outline is not available for current semester. To view outlines from other years and/or semesters, visit the archives .

1. Course Details

Summary of Course

This course introduces the stochastic models used by actuaries to model both liabilities and assets and illustrates their applications in actuarial work. Topics covered include main features of a Markov chain and applications to experience rating; Markov process models and applications to insurance, survival, sickness and marriage models; simple time series models including a random walk and auto-regressive models and their application to investment variables; methods for simulation of a stochastic process. Students will be expected to implement models using the R software in a numerical computer package.

Teaching Times and Locations

Please note that teaching times and locations are subject to change. Students are strongly advised to refer to the Class Timetable website for the most up-to-date teaching times and locations.

View course timetable

Course Policies & Support

Course Aims and Relationship to Other Courses

The primary aim of this course is to provide students with an understanding of the mathematical concepts and techniques that are used by actuaries to model the stochastic processes of both assets and liabilities.

This course provides an introduction to the stochastic models used by actuaries to model both liabilities and assets and illustrates their applications in actuarial work. The material is at a mathematically rigorous level with a strong foundation in mathematics. The required knowledge of the course is a good understanding of probability and statistics as covered in ACTL2131 Probability and Mathematical Statistics or MATH2801 and MATH2831. You should also be proficient with calculus and linear algebra. The assumed knowledge of the course is a good understanding of mathematics as covered in MATH1151 and MATH1251.

The course will have applications in other courses in the actuarial major. More advanced models are covered in ACTL3141 Actuarial Models and Statistics and ACTL3162 General Insurance Techniques. The course is necessary knowledge for the more advanced coverage in ACTL3141 Actuarial Models and Statistics, ACTL3151 Life Contingencies, ACTL3162 General Insurance Techniques, and ACTL3182 Asset-Liability and Derivative Models. Advanced Data Analytics methods relevant to actuarial work is covered in ACTL3142 Actuarial Data and Analysis.

In the old exemption rule (before 2020), the course contributes to the actuarial professional subjects CT4 Models & CT6 Statistical Models of the Institute of Actuaries. Students achieving an average of 65% or higher of ACTL2102 (1/3 of grade) and ACTL3141 (2/3 of grade) marks will be recommended for exemption from the professional CT4 examination. Students achieving an average of 65% or higher of ACTL2102 (1/3 of grade) and ACTL3162 (2/3 of grade) marks will be recommended for exemption from the professional CT6 examination. Exemptions from professional actuarial examinations require above average performance in the equivalent University course.

2. Staff Contact Details

Position Title Name Email Location Phone Consultation Times
Lecturer-in-chargeAProfJae Kyung WooRoom 574, Level 5, East Wing, UNSW Business School Building93857559TBA

​There is a regular consultation every week. Additional consultations will be provided for the final exam. These will be scheduled and announced during the term.

3. Learning and Teaching Activities

Approach to Learning and Teaching in the Course

All lectures and tutorials are delivered online. Lectures will review the main topics and provide coverage of the course concepts. They are an opportunity for students to develop an understanding of the main topics covered in the course and the level of knowledge expected. They provide a guide to the course of study during the session and the material students need to read and review. Students should read the prescribed readings prior to the lecture.

Tutorial exercises discussions and in-class activities are for students to ask questions on aspects of the course that need further clarification, and to interact with other students in the course. Students need to attempt the homework problems alone first and identify problems that require closer review.

Learning Activities and Teaching Strategies

It is expected that students will take a pro-active approach to learn. The course is organised into learning activities. By its nature, the actuarial program develops problem-solving and professional skills, and all activities contribute to that development. Thus, special care is taken when designing in-class activities, homework problems, and optional readings.

Tutorials are for students to ask questions on aspects of the course that need further clarification, to develop problem-solving skills, and to interact with other students in the course. Students need to attempt the tutorial problems prior to the tutorial and identify problems that require further discussion. They are an opportunity to learn from other students and to develop team skills by working on problems with other students.

5. Course Resources

The website for this course is on Moodle.

Moodle course website includes the following:

  • Announcements
  • Course outline
  • Lecture slides and recording
  • Tutorial exercises and solutions
  • Online quizzes and assignment information and feedbacks
  • Final exam information and instruction

The prescribed textbooks for the course are:

  • Sheldon M. Ross, Introduction to Probability Models, 12th edition, Academic Press 2014.
  • Ngai Hang Chan, Time Series: Applications to Finance, 2nd edition, Wiley publications, 2010
  • Formulae and Tables for Actuarial Examinations of the Faculty of Actuaries and the Institute of Actuaries

Suggested (optional) readings are:

  • Sheldon M. Ross, Stochastic Processes, 2nd edition, John Wiley, 1996
  • Chris Chatfield, The Analysis of Time Series: An Introduction, 6th edition, CRC Press, 2003.
  • Douglas C. Montgomery, Cheryl L. Jennings, and Murat Kulahci, Introduction to Time Series Analysis and Forecasting, Wiley Series in Probability and Statistics, 2008.

6. Course Evaluation & Development

Feedback is regularly sought from students and continual improvements are made based on this feedback. At the end of this course, you will be asked to complete the myExperience survey, which provides a key source of student evaluative feedback. Your input into this quality enhancement process is extremely valuable in assisting us to meet the needs of our students and provide an effective and enriching learning experience. The results of all surveys are carefully considered and do lead to action towards enhancing educational quality.

Each year feedback is sought from students and other stakeholders about the courses offered in the School and continual improvements are made based on this feedback. UNSW's end of semester myExperience survey is one of the ways in which student evaluative feedback is gathered. Student feedback is taken seriously, and continual improvements are made to the course based on such feedback. Significant changes to the course are communicated to students taking the course. Your input into improving future offerings of the course is highly valued.

Feedback from Term 2 2019 indicated that it is better to allocate fewer hours for the first two modules (easier than the later part) and spend more time for the rest of the materials and to develop formative assessment items that can be used in tutorials. Hence, we will spend more time in later modules and formative online quizzes will be developed.

Due to the COVID-19 situation, activities that were traditionally face-to-face such as lectures and tutorials, and weekly consultations are delivered online in this term. In addition, the usual mid-term exam is replaced by an online quiz, while the traditional final exam will be replaced by an exam that can be conducted online.

7. Course Schedule

Note: for more information on the UNSW academic calendar and key dates including study period, exam, supplementary exam and result release, please visit:
Week Activity Topic Assessment/Other
Week 1: Lecture

Module 0: Principles of actuarial modelling; Introduction to stochastic processes

Module 1: Discrete-time Markov Chains

*Module 4: Introduction to Simulation

Week 2: Lecture

Module 1: Discrete-time Markov Chains

Module 2: Exponential Distribution and the Poisson Process


Week 3: Lecture

Module 2: Exponential Distribution and the Poisson Process

Module 3: Continuous-time Markov Chains

*Module 4: Introduction to Simulation

Week 4: Lecture

Module 3: Continuous-time Markov Chains

Week 5: Lecture

Module 3: Continuous-time Markov Chains

Week 6: Flexibility Week

No lecture

Review video

Week 7: Lecture

Module 5.1: Introduction to time series (ARMA models)

Week 8 : Lecture

Module 5.2: Causality, Invertibility, ACF, PACF

Week 9: Lecture

Module 5.2: Causality, Invertibility, ACF, PACF

Module 5.3: Estimation, Model selection, checking

Week 10: Lecture

Module 5.3: Forecasting

Module 5.4: Non-stationarity time series modelling, Markov property

8. Policies and Support

Information about UNSW Business School protocols, University policies, student responsibilities and education quality and support.

Program Learning Outcomes

The Business School places knowledge and capabilities at the core of its curriculum via seven Program Learning Outcomes (PLOs). These PLOs are systematically embedded and developed across the duration of all coursework programs in the Business School.

PLOs embody the knowledge, skills and capabilities that are taught, practised and assessed within each Business School program. They articulate what you should know and be able to do upon successful completion of your degree.

Upon graduation, you should have a high level of specialised business knowledge and capacity for responsible business thinking, underpinned by ethical professional practice. You should be able to harness, manage and communicate business information effectively and work collaboratively with others. You should be an experienced problem-solver and critical thinker, with a global perspective, cultural competence and the potential for innovative leadership.

All UNSW programs and courses are designed to assess the attainment of program and/or course level learning outcomes, as required by the UNSW Assessment Design Procedure. It is important that you become familiar with the Business School PLOs, as they constitute the framework which informs and shapes the components and assessments of the courses within your program of study.

PLO 1: Business knowledge

Students will make informed and effective selection and application of knowledge in a discipline or profession, in the contexts of local and global business.

PLO 2: Problem solving

Students will define and address business problems, and propose effective evidence-based solutions, through the application of rigorous analysis and critical thinking.

PLO 3: Business communication

Students will harness, manage and communicate business information effectively using multiple forms of communication across different channels.

PLO 4: Teamwork

Students will interact and collaborate effectively with others to achieve a common business purpose or fulfil a common business project, and reflect critically on the process and the outcomes.

PLO 5: Responsible business practice

Students will develop and be committed to responsible business thinking and approaches, which are underpinned by ethical professional practice and sustainability considerations.

PLO 6: Global and cultural competence

Students will be aware of business systems in the wider world and actively committed to recognise and respect the cultural norms, beliefs and values of others, and will apply this knowledge to interact, communicate and work effectively in diverse environments.

PLO 7: Leadership development

Students will develop the capacity to take initiative, encourage forward thinking and bring about innovation, while effectively influencing others to achieve desired results.

These PLOs relate to undergraduate and postgraduate coursework programs.  Separate PLOs for honours and postgraduate research programs are included under 'Related Documents'.

Business School course outlines provide detailed information for students on how the course learning outcomes, learning activities, and assessment/s contribute to the development of Program Learning Outcomes.



UNSW Graduate Capabilities

The Business School PLOs also incorporate UNSW graduate capabilities, a set of generic abilities and skills that all students are expected to achieve by graduation. These capabilities articulate the University’s institutional values, as well as future employer expectations.

UNSW Graduate CapabilitiesBusiness School PLOs
Scholars capable of independent and collaborative enquiry, rigorous in their analysis, critique and reflection, and able to innovate by applying their knowledge and skills to the solution of novel as well as routine problems.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 7: Leadership development

Entrepreneurial leaders capable of initiating and embracing innovation and change, as well as engaging and enabling others to contribute to change
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 6: Global and cultural competence
  • PLO 7: Leadership development

Professionals capable of ethical, self-directed practice and independent lifelong learning
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 5: Responsible business practice

Global citizens who are culturally adept and capable of respecting diversity and acting in a socially just and responsible way.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 5: Responsible business practice
  • PLO 6: Global and cultural competence

While our programs are designed to provide coverage of all PLOs and graduate capabilities, they also provide you with a great deal of choice and flexibility.  The Business School strongly advises you to choose a range of courses that assist your development against the seven PLOs and four graduate capabilities, and to keep a record of your achievements as part of your portfolio. You can use a portfolio as evidence in employment applications as well as a reference for work or further study. For support with selecting your courses contact the UNSW Business School Student Centre.

Academic Integrity and Plagiarism

Academic Integrity is honest and responsible scholarship. This form of ethical scholarship is highly valued at UNSW. Terms like Academic Integrity, misconduct, referencing, conventions, plagiarism, academic practices, citations and evidence based learning are all considered basic concepts that successful university students understand. Learning how to communicate original ideas, refer sources, work independently, and report results accurately and honestly are skills that you will be able to carry beyond your studies.

The definition of academic misconduct is broad. It covers practices such as cheating, copying and using another person’s work without appropriate acknowledgement. Incidents of academic misconduct may have serious consequences for students.


UNSW regards plagiarism as a form of academic misconduct. UNSW has very strict rules regarding plagiarism. Plagiarism at UNSW is using the words or ideas of others and passing them off as your own. All Schools in the Business School have a Student Ethics Officer who will investigate incidents of plagiarism and may result in a student’s name being placed on the Plagiarism and Student Misconduct Registers.

Below are examples of plagiarism including self-plagiarism:

Copying: Using the same or very similar words to the original text or idea without acknowledging the source or using quotation marks. This includes copying materials, ideas or concepts from a book, article, report or other written document, presentation, composition, artwork, design, drawing, circuitry, computer program or software, website, internet, other electronic resource, or another person's assignment, without appropriate acknowledgement of authorship.

Inappropriate Paraphrasing: Changing a few words and phrases while mostly retaining the original structure and/or progression of ideas of the original, and information without acknowledgement. This also applies in presentations where someone paraphrases another’s ideas or words without credit and to piecing together quotes and paraphrases into a new whole, without appropriate referencing.

Collusion: Presenting work as independent work when it has been produced in whole or part in collusion with other people. Collusion includes:

  • Students providing their work to another student before the due date, or for the purpose of them plagiarising at any time
  • Paying another person to perform an academic task and passing it off as your own
  • Stealing or acquiring another person’s academic work and copying it
  • Offering to complete another person’s work or seeking payment for completing academic work

Collusion should not be confused with academic collaboration (i.e., shared contribution towards a group task).

Inappropriate Citation: Citing sources which have not been read, without acknowledging the 'secondary' source from which knowledge of them has been obtained.

Self-Plagiarism: ‘Self-plagiarism’ occurs where an author republishes their own previously written work and presents it as new findings without referencing the earlier work, either in its entirety or partially. Self-plagiarism is also referred to as 'recycling', 'duplication', or 'multiple submissions of research findings' without disclosure. In the student context, self-plagiarism includes re-using parts of, or all of, a body of work that has already been submitted for assessment without proper citation.

To see if you understand plagiarism, do this short quiz:


The University also regards cheating as a form of academic misconduct. Cheating is knowingly submitting the work of others as their own and includes contract cheating (work produced by an external agent or third party that is submitted under the pretences of being a student’s original piece of work). Cheating is not acceptable at UNSW.

If you need to revise or clarify any terms associated with academic integrity you should explore the 'Working with Academic Integrity' self-paced lessons available at:

For UNSW policies, penalties, and information to help you avoid plagiarism see: as well as the guidelines in the online ELISE tutorials for all new UNSW students: For information on student conduct see:

For information on how to acknowledge your sources and reference correctly, see: If you are unsure what referencing style to use in this course, you should ask the lecturer in charge.

Student Responsibilities and Conduct

​Students are expected to be familiar with and adhere to university policies in relation to class attendance and general conduct and behaviour, including maintaining a safe, respectful environment; and to understand their obligations in relation to workload, assessment and keeping informed.

Information and policies on these topics can be found on the 'Managing your Program' website.


It is expected that you will spend at least ten to twelve hours per week studying for a course except for Summer Term courses which have a minimum weekly workload of twenty to twenty four hours. This time should be made up of reading, research, working on exercises and problems, online activities and attending classes. In periods where you need to complete assignments or prepare for examinations, the workload may be greater. Over-commitment has been a cause of failure for many students. You should take the required workload into account when planning how to balance study with employment and other activities.

We strongly encourage you to connect with your Moodle course websites in the first week of semester. Local and international research indicates that students who engage early and often with their course website are more likely to pass their course.

View more information on expected workload


Your regular and punctual attendance at lectures and seminars or in online learning activities is expected in this course. The Business School reserves the right to refuse final assessment to those students who attend less than 80% of scheduled classes where attendance and participation is required as part of the learning process (e.g., tutorials, flipped classroom sessions, seminars, labs, etc.).

View more information on attendance

General Conduct and Behaviour

You are expected to conduct yourself with consideration and respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students may be asked to leave the class.

View more information on student conduct

Health and Safety

UNSW Policy requires each person to work safely and responsibly, in order to avoid personal injury and to protect the safety of others.

View more information on Health and Safety

Keeping Informed

You should take note of all announcements made in lectures, tutorials or on the course web site. From time to time, the University will send important announcements to your university e-mail address without providing you with a paper copy. You will be deemed to have received this information. It is also your responsibility to keep the University informed of all changes to your contact details.

Student Support and Resources

​The University and the Business School provide a wide range of support services and resources for students, including:

Business School EQS Consultation Program
The Consultation Program offers academic writing, literacy and numeracy consultations, study skills, exam preparation for Business students. Services include workshops, online resources, individual and group consultations. 
Level 1, Room 1035, Quadrangle Building.
02 9385 4508

Communication Resources
The Business School Communication and Academic Support programs provide online modules, communication workshops and additional online resources to assist you in developing your academic writing.

Business School Student Centre
The Business School Student Centre provides advice and direction on all aspects of admission, enrolment and graduation.
Level 1, Room 1028 in the Quadrangle Building
02 9385 3189

UNSW Learning & Careers Hub
The UNSW Learning & Careers Hub provides academic skills and careers support services—including workshops, individual consultations and a range of online resources—for all UNSW students. See their website for details.
Lower Ground Floor, North Wing Chancellery Building.
02 9385 2060

Student Support Advisors
Student Support Advisors work with all students to promote the development of skills needed to succeed at university, whilst also providing personal support throughout the process.
John Goodsell Building, Ground Floor.
02 9385 4734

International Student Support
The International Student Experience Unit (ISEU) is the first point of contact for international students. ISEU staff are always here to help with personalised advice and information about all aspects of university life and life in Australia.
Advisors can support you with your student visa, health and wellbeing, making friends, accommodation and academic performance.
02 9385 4734

Equitable Learning Services
Equitable Learning Services (formerly Disability Support Services) is a free and confidential service that provides practical support to ensure that your health condition doesn't adversely affect your studies. Register with the service to receive educational adjustments.
Ground Floor, John Goodsell Building.
02 9385 4734

UNSW Counselling and Psychological Services
Provides support and services if you need help with your personal life, getting your academic life back on track or just want to know how to stay safe, including free, confidential counselling.
Level 2, East Wing, Quadrangle Building.
02 9385 5418

Library services and facilities for students
The UNSW Library offers a range of collections, services and facilities both on-campus and online.
Main Library, F21.
02 9385 2650

Moodle eLearning Support
Moodle is the University’s learning management system. You should ensure that you log into Moodle regularly.
02 9385 3331

UNSW IT provides support and services for students such as password access, email services, wireless services and technical support.
UNSW Library Annexe (Ground floor).
02 9385 1333