Industrial Projects

2006-07 Projects

Credit Default Swap and Asset Swap Pricing Models

Sponsor: Bank of America (London Office)
Advisors: Jon Abraham, Arthur Gerstenfeld (MGE)
Student: Russell Yang Gao

Two swap pricing models were developed at Bank of America's London office. The credit default swap model takes market offer and bid prices of individual swaps to calculate the intrinsic value of a CDS index, facilitating skew trades and completing client valuation requests. The asset swap model constructs a LIBOR curve, provides detailed cash flow analysis and spread valuation, and measures interest risk. Both models produce accurate valuations and contribute to daily trading operations at Bank of America.

Analysis of Methods for Loss Reserving

Sponsor: Hanover Insurance
Advisors: Jon Abraham, Arthur Heinricher
Students: Timothy Connor, Xinjia Liu, Gregory Lynskey, Ida Rapaj

Hanover Insurance uses numerous methods to project total paid claims for all its lines of business. A system was developed to assess the accuracy of the projections, based on data for six accident years and four lines of business. A strictly mathematical forecasting method was sought; however, no model was found to replace the years of experience and knowledge of Hanover's actuaries.

Risk Score Assignment for Long-Term Care Underwriting

Sponsor: John Hancock
Advisors: Jon Abraham, Art Heinricher
Students: Joanna Kluza, Joseph Kraynak, William Treese, Jaris Wicklund

The project goal was to test a previously designed adaptive risk scoring model for long term care insurance underwriting using actual applicant data from John Hancock. A data filtering method for removing applicants who should not be used to train the model was developed. The model provides accurate risk class assignment, based solely on the medical conditions, when trained on the filtered data. In addition, the model identifies errors in the risk points assigned to individual medical conditions.

Modeling-Based Minimization of Time-to-Uniformity in Microwave Heating Systems

Sponsor: The Ferrite Company
Advisor: Vadim Yakovlev
Student: Brian Cordes

Development of a Statistical Model for NPN Bipolar Transistor Mismatch

Sponsor: Allegro Microsystems
Advisor: Jayson Wilbur
Student: Maurice LaMontagne

Bayesian Logistic Regression with Spatial Correlation: An Application to Tennessee River Pollution

Sponsor: National Center for Health Statistics
Advisor: Balgobin Nandram
Student: William Marjerison

Benchmarking on Small Areas

Sponsor: National Center for Health Statistics
Advisor: Balgobin Nandram
Student: Criselda Toto

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