ABSTRACT

This research project investigates the role of actuarial science in the regulation of financial markets, with a specific focus on the application of the Lee-Carter mortality forecasting model and the Autoregressive Conditional Heteroskedasticity (ARCH) model. By examining these two methodologies within the context of financial market regulation, the study aims to elucidate their implications for risk management, policy formulation, and regulatory oversight.

The project begins with a comprehensive review of the literature on actuarial science, financial market regulation, and the Lee-Carter and ARCH models. This review highlights the importance of accurate mortality projections and volatility forecasting in assessing and mitigating risks within financial markets.

Methodologically, the research employs a combination of quantitative analysis and modeling techniques. Utilizing historical mortality and financial data, the study applies the Lee-Carter model to forecast future mortality rates and assess their impact on pension liabilities and insurance products. Additionally, ARCH models are utilized to analyze the time-varying volatility of financial returns and evaluate the effectiveness of risk management strategies.

Through detailed analysis and interpretation of the results, this project provides valuable insights into the interaction between actuarial science and financial market regulation. By identifying trends in mortality and volatility, policymakers and regulatory authorities can better understand and address systemic risks, thereby enhancing market stability and investor confidence.

In conclusion, this research underscores the importance of incorporating actuarial methods such as the Lee-Carter and ARCH models into regulatory frameworks for financial markets. By leveraging these advanced techniques, policymakers can make more informed decisions and implement targeted interventions to safeguard against adverse market outcomes. Ultimately, the findings of this study contribute to the ongoing dialogue surrounding the integration of actuarial science into the regulation of financial markets, with implications for risk management practices and regulatory policy development.