MATH 3640 – Assignment 7
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1) (6 points) Provide one example for each of the following in regards to next-steps after
calculating the overall indication:
i. Regulatory Constraints
ii. Operational Constraints
iii. Marketing Constraints
2) (2 points) Based on statistical, operational, social, and legal criteria, describe the pros and cons
of using Credit Score as a variable in pricing models.
3) (3 points) Provide two examples of non-pricing solutions to a negative indication and one
example of a pricing solution.
4) (1 point) Briefly describe what is meant by a “hard market” in regards to the Underwriting
Cycle.
5) (8 points) Provide a full numerical example to describe Favorable Selection experienced after
three years with a simple marketplace containing only two companies.