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CB2: Study Guide Page 1
Subject CB2
2025 Study Guide
Contents
Section 1 Introduction Page 1

Section 2 Subject sequencing and contents Page 2
Section 3 Syllabus Page 4
Section 4 Core Reading Page 11
Section 5 Skills and assessment Page 11
Section 6 ActEd study support Page 15
Section 7 General support and information Page 17
1 Introduction
This Study Guide has been created to help you navigate your way through Subject CB2. It
contains useful information you will need before starting to study Subject CB2 for the 2025
exams. You may also find it useful to refer to throughout your studies.
Further information on study skills can be found on our website at ActEd.co.uk.
Please read this Study Guide carefully before reading the Course Notes, even if you have studied
for some actuarial exams before.
Before you start

When studying for the Institute and Faculty of Actuaries’ exams, you may need:
 a copy of the Formulae and Tables for Examinations of the Institute and Faculty of
Actuaries, 2nd Edition (2002) – these are referred to simply as the Tables
 a scientific calculator and/or software package to help with calculations.
The Tables are available from the Institute and Faculty of Actuaries’ eShop. Please visit
actuaries.org.uk.
The Actuarial Education Company © IFE: 2025 Examinations

Page 2 CB2: Study Guide
2 Subject sequencing and contents
2.1 Links to other subjects
Associateship Qualification
Business Economics (Subject CB2) is a fundamental subject contributing to the foundations of the
Associateship Qualification. Knowledge gained from this subject is implicitly assumed and applied
across many other subjects, in particular:
 Business Finance (Subject CB1)
 Business Management (Subject CB3)
 Financial Engineering and Loss Reserving (Subject CM2)
 Actuarial Practice (Subject CP1).
Fellowship Qualification
An understanding of Business Economics may be required for any of the Specialist Advanced (SA)
examinations, as these examinations tend to focus on ‘real world’ scenarios, and the subject is
particularly relevant for the potential scenarios presented in Investment & Finance Specialist
Principles (Subject SP5), Pensions & Other Benefits (Subject SA4) and Investment & Finance
(Subject SA7) examinations. Economic judgement should be applied and considered across all
Specialist Principles (SP) and Specialist Advanced (SA) subjects.
2.2 Subject contents

There are eight parts to the Subject CB2 course. The parts cover related topics and are broken
down into modules. At the end of parts two, four, six and eight there is an assignment testing the
material from the previous two parts.
The following table shows how the parts and modules relate to each other. The final column
shows how the modules relate to the days of the regular tutorials. This table should help you plan
your progress across the study session.
© IFE: 2025 Examinations The Actuarial Education Company

No of Tutorial –
Part Module Title X Assignment
pages 4 days
1 Economic concepts and systems 17
2 Supply and demand (1) 21
1
3 Supply and demand (2) 28
4 Background to demand 37 X1 1
5 Background to supply 38
2 6 Perfect competition and monopoly 26
7 Monopolistic competition and oligopoly 26
8 Pricing strategies 23
3 9 Market failure and government 42
intervention
X2 2
10 The macroeconomic environment 26
4 11 Macroeconomic objectives 23
12 International trade 15
13 Balance of payments and exchange rates 12
5 14 The financial system 35
15 The money market and monetary policy 27
16 Main strands of economic thinking 15 X3 3
17 Classical and Keynesian theory 55

6
18 Relationship between the goods and
28
money markets
19 Monetarist and new classical schools, and

28
Keynesian responses
7
20 Supply-side policy 17
21 Demand-side policy 22 X4 4
22 Exchange rate policy 22
8 23 Global harmonisation and monetary union 15
24 Summary of debates on theory and policy 23

3 Syllabus
The Syllabus for each subject is produced by the Institute and Faculty of Actuaries. It includes
information to support the study of this subject. The Syllabus will guide you through what you
need to learn, the application of learning, as well as the skills that you need to develop.
Students can use the Syllabus as a guide for learning and development. We recommend that you
use the Syllabus as an important part of your study.
3.1 Aim
Subject CB2 introduces the core economic principles and how these can be used in a business
environment to help inform decision-making and behaviour. It includes the fundamental
concepts of microeconomics that explain how economic agents make decisions and how these
decisions interact. It also explores the principles underlying macroeconomics that explain how
the economic system works and how decisions taken by economic agents affect the financial
system and relevant aggregate economic and financial variables.
3.2 Topics and topic weightings

This subject covers the following topics:
1. Economic schools, the economic way of thinking and recent historical
applications (5%)
2. Microeconomics (40%)
3. Macroeconomics (55%)
The topic weighting percentage noted alongside the topics is indicative of the volume of content
of a topic within the subject and therefore broadly aligned to the volume of marks allocated to
this topic in the examination. For example, if a topic is 20% of the subject then you can expect
that approximately 20% of the total marks available in the examination paper will be available on
that topic.
Students should ensure that they are well prepared across the entire syllabus and have an
understanding of the principal terms used within the course.
3.3 Objectives
The detailed syllabus objectives for Subject CB2 are given below. To the right of each objective are
the module numbers in which the objective is covered in the ActEd course. The relevant
individual syllabus objectives are also included at the start of each course module.
1. Economic schools, economic way of thinking and recent historical applications (5%)
An introduction to economic concepts and models, their use in business as well as recent
economic and financial history.
1.1 Relationship between economics and business (Module 1)

1.1.1 Principles of economic choice, including opportunity cost and scarcity
1.1.2 Core economic concepts used by businesses to make choices relevant to selection
of outputs, inputs, technology, location and competition
1.1.3 Features of and differences between microeconomics and macroeconomics
1.2 Main economic schools and their key features: (Modules 9, 16, 17, 19 and 24)
 Classical
 Marxian socialism
 Neo-classical, Keynesian, neo-Keynesian and post-Keynesian
 Monetarist
 Austrian
1.3 Recent macroeconomic history (Modules 14, 15, 21, 23 and 24)
1.3.1 Progress of the world economy since the Great Depression, with a particular focus
on banking crises, their consequences and irrational behaviour
1.3.2 Banking crisis of 2008, the Great Recession, and recovery, including:
 Effectiveness of monetary policy in the 2008 financial crisis
 Governments actions to combat recession
 Aftershocks in Europe
 Stimulus–austerity debate and regulatory action after the 2008 crisis
2. Microeconomics – the behaviour of consumers, firms and markets (40%)
Understand, in detail, models of consumer choice, the theory of the firm and how these
affect business decisions under different conditions.
2.1 How competitive markets operate (Modules 2 and 3)
2.1.1 Role of the price mechanism and the behaviour of firms and consumers in a free
market
2.1.2 Factors that influence market demand and supply
2.1.3 How market equilibrium quantity and price are achieved
2.1.4 How markets react to changes in demand and supply
2.1.5 Calculation of price and income elasticities of demand and price elasticity of
supply, using both original and average quantities
2.1.6 Factors that affect elasticity
2.1.7 Effect of elasticity on the short- and long-term operation of markets

2.1.8 How firms deal with risk and uncertainty about future market movements
2.1.9 Price expectations and speculation and how price bubbles develop
2.2 Consumer demand and behaviour (Module 4)
2.2.1 The concept of utility and the representation of consumer preferences as

indifference curves
2.2.2 How rational choice and optimal consumption choice is determined by using
indifference curves and budget lines
2.2.3 Rational choice, perfect information and irrational behaviour in the context of
behavioural economics
2.3 The impact of advertising on sales and demand (Module 3)
2.4 Impact of the production function, costs of production, revenue and profit on a
firm’s price and output decisions (Module 5)
2.4.1 The production function and the relationship between short- and long-term
inputs and outputs
2.4.2 Average and marginal physical product
2.4.3 Meaning and measurement of costs and how these vary with short- and
long-term output
2.4.4 Total, average and marginal costs
2.4.5 Economies of scale and how a business can achieve efficiency in selecting the level
of its inputs
2.4.6 Revenue and profit and how they are influenced by market conditions
2.4.7 Calculation of average and marginal revenue
2.4.8 Measurement of profit and how a firm arrives at its profit-maximising output
2.4.9 The ‘shut-down’ point in the short and long run
2.5 Profit maximisation under perfect competition and monopoly (Module 6)
2.5.1 What determines the market power of a firm
2.5.2 Main features of a market characterised by perfect competition, including how

output and price are determined in the short and long term
2.5.3 Monopolies and how they emerge; how they select profit-maximising price and
output; and the determination of the profit of a monopolist
2.5.4 Barriers to entry and market contestability and their impact on the profit of a
monopolist

2.6 Profit maximisation under imperfect competition (Module 7)
2.6.1 Behaviour of firms under monopolistic competition and why in this type of market
only normal profits are made in the long run
2.6.2 Main features of an oligopoly and the behaviour of firms in an oligopoly
2.6.3 Competition and collusion of firms in an oligopoly and how strategic decisions of
such firms can be explained by game theory
2.6.4 Behaviour of oligopolists and the consumer interest
2.7 Pricing strategies that firms in the financial services sector can adopt (Module 8)
2.7.1 How prices are determined in practice and factors that affect the ability of a firm
to determine its prices
2.7.2 Average-cost pricing and price discrimination
2.7.3 Pricing strategy for multiple products and how pricing varies with the stage in the
life of a product
3. Macroeconomics and the role of government (55%)
Understand aggregate economic variables and concepts which relates them to

government policy, business decision making and financial market variables.
3.1 Government intervention in a market (Module 9)
3.1.1 Extent to which businesses meet the interests of consumers and society in general
3.1.2 Socially efficient perfect markets and why markets fail to achieve the theoretical
ideal of social efficiency
3.1.3 Why externalities can lead to inefficient markets
3.1.4 How governments intervene in markets to influence business behaviour and the
drawbacks of such intervention
3.1.5 Role of taxation and regulation in correcting shortcomings in markets
3.1.6 Why government intervention might not improve market outcomes in practice
even if the existence of ‘market failures’ suggest they can in theory
3.1.7 Policy instruments that can be used to promote environmental sustainability
3.2 Relationship between the government and the individual firm (Modules 9 and 20)
3.2.1 Main targets of ‘competition policy’ and the extent to which it is effective
3.2.2 Why a free market can fail to achieve the optimal amount of research and
development
3.2.3 Government intervention to encourage technological advance and innovation

3.3 Globalisation and multinational business (Module 23)
3.3.1 Globalisation and its impact on business
3.3.2 The driving processes of globalisation and the benefits of globalisation
3.4 Importance of international trade (Module 12)
3.4.1 Growth of international trade and its benefits to countries and firms
3.4.2 Advantages of specialisation
3.4.3 Arguments for trade restrictions and protection of domestic industries
3.4.4 Role of the World Trade Organization (WTO) in international trade
3.5 Impact of the macroeconomic environment on business (Modules 10, 11 and 17)
3.5.1 Main macroeconomic variables that governments seek to control
3.5.2 Impact of an economic stimulus on business output
3.5.3 Difference between actual and potential growth
3.5.4 Factors that determine economic growth and the reasons for differences in
different nations’ growth rates
3.5.5 Why economies experience periods of boom followed by periods of recession and
the factors that influence the length and magnitude of the phases of a business
cycle
3.5.6 Causes and costs of unemployment and its impact on the level of business activity
3.5.7 Determination of the price level in the economy by the interaction between
aggregate supply (AS) and aggregate demand (AD) in a simple AS–AD model
3.5.8 Causes and costs of inflation and its impact on the level of business activity
3.5.9 Gross domestic product (GDP) and its measurement
3.5.10 Representation of the economy as a simple model of the circular flow of income
3.6 Balance of payments and the determination of exchange rates

(Modules 13, 22 and 23)
3.6.1 Definitions of ‘the balance of payments’ and how trade and financial movements
affect it
3.6.2 How exchange rates are determined and their impact on business
3.6.3 Relationship between the balance of payments and exchange rates
3.6.4 Advantages and disadvantages of fixed and floating exchange rates

3.6.5 How governments and/or central banks seek to influence the exchange rates and
the implications of such actions for other macroeconomic policies and for
business
3.6.6 Purpose and effectiveness of monetary union and single currencies, with
reference to the European Economic and Monetary Union, the Exchange Rate
Mechanism and the creation of a single Currency
3.7 Role of money and interest rates in the economy (Modules 14, 15 and 18)
3.7.1 Functions of money
3.7.2 Factors that determine the amount of money in the economy, what causes it to
grow and the role of banks in this process
3.7.3 Concept of the money multiplier
3.7.4 Determination of interest rates
3.7.5 Relationship between money and interest rates
3.7.6 Why central banks play a crucial role in the functioning of economies
3.7.7 How a change in the money supply and/or interest rates affects the level of
business activity
3.8 Role, structure and stability of the financial system (Module 14)
3.8.1 Functions of the financial sector
3.8.2 Role and functions of investment funds, banks and insurance companies/pension
funds
3.8.3 Different ways banks and insurance companies can be exposed to credit risk and
liquidity risks through:
 Bank loans
 Corporate bonds
 Securitisations (which can be owned by the non-bank sector)
 Syndicated loans
 Credit derivatives
3.8.4 Why the banking sector is more likely to be exposed to systemic risk than the non-
bank financial sector
3.8.5 How financial innovation could lead to some functions of the banking sector being
performed by non-banks

3.9 Factors that determine the level of business activity and how they also affect
unemployment and inflation (Modules 11, 17, 18 and 19)
3.9.1 Determination of the equilibrium level of income within a simple aggregate

demand–expenditure model
3.9.2 Concept of the multiplier and the calculation of its value
3.9.3 Impact of a rise in money supply on output and prices
3.9.4 Relationship between unemployment and inflation and whether the relationship
is stable
3.9.5 How business and consumer expectations affect the relationship between
unemployment and inflation and the formation of such expectations
3.9.6 Independent central banks, inflation targeting and their impact on

unemployment, business cycles and growth
3.9.7 Course of a business cycle and its turning points
3.9.8 Whether the business cycle is caused by changes in aggregate demand or changes
in aggregate supply (or both)
3.10 Impact of macroeconomic policies on businesses (Modules 15 and 21)
3.10.1 Types of macroeconomic policy that are likely to have an impact on business and
the way in which this impact takes effect
3.10.2 Impact of fiscal policy on the economy and business and the factors that
determine its effectiveness in smoothing out economic fluctuations
3.10.3 Fiscal rules and their efficacy
3.10.4 How monetary policy works in the UK and the eurozone and the roles of the Bank
of England and the European Central Bank
3.10.5 Targeting inflation to influence interest rates and economic activity
3.10.6 The merits of central banks following a simple inflation target and possible
alternatives
3.11 Supply-side policies and their impact on businesses (Module 20)
3.11.1 Effect of supply-side policies on business and the economy
3.11.2 Types of supply-side policies that can be pursued and their effectiveness
3.11.3 Impact of cutting taxes on business
3.11.4 Major forms of government policy that can be used to encourage competition

4 Core Reading
This section explains the role of the Core Reading and how it links to the Syllabus, supplementary
ActEd text and the examination.
4.1 Core Reading
Accreditation
The Institute and Faculty of Actuaries would like to thank the numerous people who have helped
in the development of the material contained in the Core Reading.
The Core Reading consists of references to material from:
Sloman, J., Garratt, D., Guest, J., 2022, Economics, 11th ed., Pearson
ISBN: 978-1-292-40533-9 (print)

ISBN: 978-1-292-40539-1 (PDF)
ISBN: 978-1-292-40540-7 (ePub)
In addition, there are a number of extra sections of Core Reading, which are included within the
relevant modules in the ActEd Course Notes.
Further reading
A list of additional resources to support candidate learning and development for this subject can
be found on the Module pages on the Institute and Faculty of Actuaries’ website:
actuaries.org.uk/curriculum/
There is also further information available on the website linked to the textbook as well as
relevant external websites (indicated at the end of some chapters of the textbook). This material
is a useful source of additional material, but it is not directly examinable.
4.2 Links to the Syllabus

Each part of the Core Reading relates directly to the Syllabus.
The relevant syllabus objectives are included at the start of each module for reference.
The Core Reading supports coverage of the Syllabus in helping to ensure that both depth and
breadth are re-enforced.
4.3 Links to the examination

Examiners can set questions based on any area of the Syllabus within any examination sitting and
will consider and draw from the Core Reading when setting examinations questions.
Students will be expected to apply the Core Reading to scenarios and questions proposed by the
examiners.

The exams in April and September 2025 will be based on the Syllabus and Core Reading as at
31 May 2024. We recommend that you always use the up-to-date Core Reading to prepare for
the exams.
Past papers indicate to students how the examiners apply the Core Reading. The Examiners’
Reports provide further insight as to how students answered the questions and how marks were
awarded.
4.4 ActEd text

The Core Reading deals with each syllabus objective and covers what is needed to pass the exam.
However, the tuition material that has been written by ActEd enhances it by giving examples and
further explanation of key points. Here is an excerpt from some ActEd Course Notes to show you
how to identify Core Reading and the ActEd material. Core Reading is shown in this bold font.
In the example given above, the index will fall if the actual share price goes below the theoretical
ex-rights share price. Again, this is consistent with what would happen to an underlying portfolio.
After allowing for chain-linking, the formula for the investment index then becomes:
This is
 Ni ,t Pi ,t ActEd
I (t )  i
B(t ) text
where Ni ,t is the number of shares issued for the ith constituent at time t; This is Core
Reading
B (t ) is the base value, or divisor, at time t.
Copyright
All study material produced by ActEd is copyright and is sold for the exclusive use of the
purchaser. The copyright is owned by Institute and Faculty Education Limited, a subsidiary of the
Institute and Faculty of Actuaries. Unless prior authority is granted by ActEd, you may not hire
out, lend, give out, sell, store or transmit electronically or photocopy any part of the study
material. You must take care of your study material to ensure that it is not used or copied by
anybody else.
Legal action will be taken if these terms are infringed. In addition, we may seek to take
disciplinary action through the Institute and Faculty of Actuaries or through your employer.
These conditions remain in force after you have finished using the course.

5 Skills and assessment
5.1 Technical skills

Subjects CB1 and CB2 are less mathematical than the other Core Principles subjects, instead
involving in-depth understanding of economics, business and accounting principles.
5.2 Exam skills

In each examination, students will be expected to demonstrate, through their answers, that they
have knowledge of, can apply and use higher order skills in this subject:
 Knowledge will be demonstrated through answering questions that assess understanding
of that knowledge as well as through questions that ask for the application of relevant
knowledge to scenarios.
 Application will be demonstrated through answering questions that assess the ability to
identify and apply relevant concepts and skills to solve problems (both numerical and
non-numerical).
 Higher order skills will be demonstrated through questions that will assess the ability to
use relevant knowledge, concepts and skills to solve problems, draw appropriate
conclusions, and make meaningful and appropriate comments on those conclusions.
In Subject CB2, the approximate split of assessment across the three skill types is:
 Knowledge – 20%
 Application – 60%
 Higher Order skills – 20%.
The Institute and Faculty of Actuaries use command verbs (such as ‘Define’, ‘Discuss’ and
‘Explain’) to help students to identify what the question requires. The examination can be
composed of questions drawing from any part of the syllabus and using any command verb.
The Institute and Faculty of Actuaries has produced guidance on ‘Command verbs used in the
Associate and Fellowship examinations’, to help students to understand what each command
verb is asking them to do.
You can find the relevant document on the Institute and Faculty of Actuaries’ website at:
actuaries.org.uk/qualify/prepare-for-your-exams
5.3 Assessment
At the time of writing it is unknown what the assessment method is for Subject CB2. The IFoA
have previously announced that the exam will be changing to Objective-Based Assessment (OBA),
but it is unclear when this change will take place. You should therefore monitor communications
from the IFoA for further details.

If it is to be an Objective Based Assessment (OBA), the assessment is expected be in the form of a

2 hour timed, online objective-based assessment (OBA) examination. This is likely to consist of 60
questions of varying styles. Sample questions illustrating the form of the question types are
available on the IFoA website.
If it is to use a traditional (non-OBA) approach, the assessment is expected to consist of one

3 hour 20 minute timed, online examination. This time includes reading time, as well as the time
taken for students to download and/or print the question paper.
In this case, students can expect to answer a number of questions of varying marks, using
Microsoft Word to construct and type their answers.
5.4 Further information

The Institute and Faculty of Actuaries has produced a number of documents, which it advises
students to read and understand. In particular, the:
 Qualification Handbook, which contains information on studying and preparing for exams,
as well as available support and resources
 Examinations Handbook, which contains practical assistance on how to sit an Institute and
Faculty of Actuaries’ examination
 Assessment Regulations document, which includes rules on eligibility, entry and conduct
during an online assessment.
The Qualification Handbook can be found at:
actuaries.org.uk/qualify/student-and-associate-exam-news/qualification-handbook
The Examinations Handbook and Assessment Regulations document can be found at:
actuaries.org.uk/qualify/my-exams/ifoa-exams
IMPORTANT NOTE: These documents may be updated and re-published in the weeks leading up
to each exam session. It is important that you keep up-to-date with any changes and
developments.

6 ActEd study support

An overview of ActEd’s products and services, and guidance on how to choose the best ones for
you, can be found on our website at ActEd.co.uk/productguide.
6.1 Summary of ActEd products and services

Detailed descriptions of all ActEd’s products and services can be found on our website at
ActEd.co.uk. The details of the specific products and services available for Subject CB2 are
dependent on the assessment method, which is uncertain at the time of writing. However,
available products and services are likely to consist of:
 Course Notes
 X Assignments*
 Series X Marking (if non-OBA)
 Online Classroom
 Flashcards
 Past Exam Questions with ActEd Solutions (PEQAS) (if OBA)
 ASET – four years of exam papers, ie eight sittings (if non-OBA)
 Mock Exam* – one exam-style test
 Additional Mock Pack (AMP)* – two additional exam-style tests
 Mock Exam Marking (if non-OBA)
 Marking Vouchers (if non-OBA).
Products are generally available in both paper and eBook format. Visit ActEd.co.uk for full details
about available eBooks, software requirements and restrictions.
* If OBA, X Assignments and mock exams will be delivered through our virtual learning
environment, The Hub, and – given the online, objective-based nature – there will be no marking
services. If non-OBA, you should use the four X Assignments that are included in this CMP, and
the mock exams that will be delivered to you in the usual way.
6.2 Tuition
The following tutorials are typically available for Subject CB2:
 Regular Tutorials (four full days / eight half days)
 Block Tutorials (four days).
Tutorials are typically available both face-to-face and live online.
Full details are set out in our Tuition Bulletin, which is available on our website at ActEd.co.uk.

6.3 Questions and queries

Our online discussion forum at ActEd.co.uk/forums (or use the link from our home page at
ActEd.co.uk) is dedicated to actuarial students so that you can get help from fellow students on
any aspect of your studies from technical issues to study advice. ActEd tutors visit the site
regularly to ensure that you are not being led astray and we also post other frequently asked
questions from students on the forum as they arise.
If you are still stuck, then you can send queries by email to the Subject CB2 email address
CB2@bpp.com, but we recommend that you try the forum first. We will endeavour to contact
you as soon as possible after receiving your query but you should be aware that it may take some
time to reply to queries, particularly when tutors are running tutorials. At the busiest teaching
times of year, it may take us more than a week to get back to you.
If you have many queries on the course material, you should raise them at a tutorial or book a
personal tuition session with an ActEd tutor. Please email ActEd@bpp.com for more details.
6.4 Feedback
If you find an error in the course, please check the corrections page of our website
(ActEd.co.uk/paper_corrections.html) to see if the correction has already been dealt with.
Otherwise, please send the details via email to the Subject CB2 email address CB2@bpp.com.
Our tutors work hard to ensure that the courses are as clear as possible and free from errors.
ActEd also works with the Institute and Faculty of Actuaries to suggest developments and
improvements to the Syllabus and Core Reading. If you have any comments or concerns about
the Syllabus or Core Reading, these can be passed on via ActEd. Alternatively, you can send them
directly to the Institute and Faculty of Actuaries’ Examination Team by email to
memberservices@actuaries.org.uk.

7 General information and support
7.1 Safeguarding
We want you to feel comfortable within our learning environment and safe in the knowledge that
if you ever needed support, you know where to go.
If you need support, please contact BPP’s Safeguarding team at safeguarding@bpp.com or for
urgent concerns call 07464 542 636.
Additional information can be found at ActEd.co.uk/learningsupport.
7.2 BPP learning support

BPP’s Learning Support team offers a wide range of support for all students who disclose a
learning difficulty or disability. This support is accessible to all ActEd students free of charge.
Please contact BPP’s Learning Support team at LearningSupport@bpp.com for more information.
7.3 The Prevent Duty

The Prevent Duty is to protect people from radicalisation and being drawn into extremist views
and terrorism. As a Government-regulated training provider, ActEd has a duty to ensure that our
learners are well informed and stay safe, and to empower our students to know what to look for
and when to report concerns.
Please report any concerns to a tutor or email safeguarding@bpp.com or for urgent concerns call
07464 542 636.
More information is available at:

 ActEd.co.uk/learningsupport
 officeforstudents.org.uk/advice-and-guidance/student-wellbeing-and-
protection/counter-terrorism-the-prevent-duty/

All study material produced by ActEd is copyright and is sold
for the exclusive use of the purchaser. The copyright is
owned by Institute and Faculty Education Limited, a
subsidiary of the Institute and Faculty of Actuaries.
Unless prior authority is granted by ActEd, you may not hire

out, lend, give out, sell, store or transmit electronically or
photocopy any part of the study material.
You must take care of your study material to ensure that it

is not used or copied by anybody else.
Legal action will be taken if these terms are infringed. In

addition, we may seek to take disciplinary action through
the Institute and Faculty of Actuaries or through your
employer.
These conditions remain in force after you have finished

using the course.

CS1: Study Guide Page 1
Subject CS1
2025 Study Guide
Contents
Section 1 Introduction Page 1

Section 2 Subject sequencing and contents Page 2
Section 3 Syllabus Page 3
Section 4 Core Reading Page 9
Section 5 Skills and assessment Page 11
Section 7 General support and information Page 15
1 Introduction
This Study Guide has been created to help you navigate your way through Subject CS1. It contains
useful information you will need before starting to study Subject CS1 for the 2025 exams. You
may also find it useful to refer to throughout your studies.
Further information on study skills can be found on our website at ActEd.co.uk.
for some actuarial exams before.
Before you start

When studying for the Institute and Faculty of Actuaries’ exams, you may need:
 a copy of the Formulae and Tables for Examinations of the Institute and Faculty of
Actuaries, 2nd Edition (2002) – these are referred to simply as the Tables
 a scientific calculator and/or software package to help with calculations.
actuaries.org.uk.

Page 2 CS1: Study Guide
2 Subject sequencing and contents
2.1 Links to other subjects
Associateship Qualification
The principles introduced in Subject CS1 are further developed in Subject CS2 – Risk Modelling
and Survival Analysis. Subject CM1 – Actuarial Mathematics and Subject CM2 – Economic
Modelling apply the principles and techniques in Subject CS1 to the creation of actuarial and
financial models.
2.2 Subject contents

There are four parts to the Subject CS1 course. The parts cover related topics and are broken
down into chapters. At the end of each part there are assignments testing the material from that
part.
The following table shows how the parts and chapters relate to each other. The final column
shows how the chapters relate to the days of the regular tutorials. This table should help you plan
No of X Y Tutorial –
Part Chapter Title
pages Asst Asst 4 days
1 Data analysis 23
2 Probability distributions 63
1 3 Generating functions 30 X1 1
4 Joint distributions 59
5 Conditional expectation 20 Y1
6 Central Limit Theorem 27
7 Sampling and statistical inference 33
2 X2 2
8 Point estimation 61
9 Confidence intervals and prediction intervals 53
10 Hypothesis testing 89
3 11 Correlation 41 X3 3
12 Linear regression 77
13 Generalised linear models 74 Y2
14 Bayesian statistics 44
4 X4 4
15 Credibility theory 32
16 Empirical Bayes credibility theory 54

3 Syllabus
The Syllabus for each subject is produced by the Institute and Faculty of Actuaries. It includes
information to support the study of this subject. The Syllabus will guide you through what you
need to learn, the application of learning, as well as the skills that you need to develop.
Students can use the Syllabus as a guide for learning and development. We recommend that you
use the Syllabus as an important part of your study.
3.1 Aim
The aim of Subject CS1 is to provide a grounding in mathematical and statistical techniques that
are of particular relevance to actuarial work.
3.2 Topics and topic weightings

1. Data analysis (10%)
2. Random variables and distributions (20%)
3. Statistical inference (25%)
4. Regression theory and applications (30%)
5. Bayesian statistics (15%)
that topic.
3.3 Objectives
The detailed syllabus objectives for Subject CS1 are given below. To the right of each objective are
the chapter numbers in which the objective is covered in the ActEd course. The relevant
individual syllabus objectives are also included at the start of each course chapter.
1 Data analysis (10%)

Production of simple visualisations and statistics from a data set.
1.1 Describe the purpose and function of data analysis: (Chapter 1)
1.1.1 Aims of a data analysis (eg descriptive, inferential and predictive).
1.1.2 Stages and suitable tools used to conduct a data analysis to solve real-world
problems.

1.1.3 Sources of data and their characteristics, including extremely large data sets.
1.1.4 Meaning and value of reproducible research and the elements required to ensure
a data analysis is reproducible.
1.2 Complete exploratory data analysis: (Chapter 11)
1.2.1 Appropriate tools to calculate suitable summary statistics and undertake
exploratory data visualisations.
1.2.2 Interpret and make statistical inferences using Pearson’s, Spearman’s and
Kendall’s measures of correlation for bivariate data.
1.2.3 Principal components analysis to reduce the dimensionality of a complex data set.
2 Random variables and distributions (20%)
The basic properties and uses of commonly used probability distributions and the
statistical properties of data generated by randomly sampling from a known distribution.
2.1 Understand the characteristics of basic univariate distributions and how to generate
samples from them: (Chapter 2)
2.1.1 Geometric, binomial, negative binomial, hypergeometric, Poisson and uniform
discrete distributions on a finite set.
2.1.2 Normal, lognormal, exponential, gamma, chi-square, t, F, beta and uniform
continuous distributions on an interval.
2.1.3 Evaluation of probabilities and quantiles associated with these distributions (by
calculation or using statistical software as appropriate).
2.1.4 Poisson process and the connection between the Poisson process and the Poisson
distribution.
2.1.5 Generation of basic discrete and continuous random variables using the inverse
transform method.
2.1.6 Generation of discrete and continuous random variables using statistical software.
2.2 Determine the characteristics of jointly distributed random variables: (Chapter 4)
2.2.1 Probability function or density function for marginal and conditional distributions
of jointly distributed random variables.
2.2.2 The conditions under which random variables are independent.
2.2.3 Covariance, the correlation and expected value of a function of two jointly
distributed random variables.
2.2.4 Mean and variance of linear combinations of random variables.
2.3 Evaluate expectations and conditional expectations: (Chapter 5)
2.3.1 Conditional expectation of one random variable given the value of another
random variable.
2.3.2 Mean and variance of a random variable as an expectation of conditional
expected values.

2.4 Evaluate and apply generating functions: (Chapter 3)

2.4.1 Moment and cumulant generating functions of a random variable.
2.4.2 Moment calculation via series expansion or differentiation of a generating
function.
2.5 State and apply the Central Limit Theorem: (Chapter 6)
2.5.1 Central Limit Theorem for a sequence of independent, identically distributed
random variables.
2.5.2. Comparison of simulated samples from a given distribution with the normal
distribution.
2.6 Describe random sampling and sampling distributions of statistics commonly used in
statistical inference: (Chapter 7)
2.6.1 Random samples from a population.
2.6.2 The sampling distribution of a statistic.
2.6.3 The mean and variance of a sample mean and the mean of a sample variance in
terms of the population mean, variance and the sample size.
2.6.4 Basic sampling distributions for the sample mean and variance for random
samples from a normal distribution.
2.6.5 The distribution of the t -statistic for random samples from a normal distribution.
2.6.6 The F distribution for the ratio of two sample variances from independent
samples taken from normal distributions.
3 Statistical inference (25%)
Uses of statistics to make inferences about the process underlying a data set.
3.1 Construct estimators and discuss their properties: (Chapter 8)
3.1.1 Method of moments for constructing estimators of population parameters.
3.1.2 Method of maximum likelihood for constructing estimators of population
parameters.
3.1.3 Efficiency, bias, consistency and mean square error of an estimator.
3.1.4 Comparison of estimators using their mean square error and bias or
unbiasedness.
3.1.5 Asymptotic distribution of maximum likelihood estimators.
3.1.6 Bootstrap method to estimating properties of an estimator.
3.2 Calculate confidence intervals and prediction intervals: (Chapter 9)
3.2.1 Confidence interval for an unknown parameter of a distribution based on a
random sample.
3.2.2 Prediction interval for a future observation based on a model fitted to a random
sample.

3.2.3 Confidence interval for an unknown parameter using a given sampling

distribution.
3.2.4 Confidence intervals for the mean and the variance of a normal distribution.
3.2.5 Confidence intervals for a binomial probability and a Poisson mean, including the
use of the normal approximation in both cases.
3.2.6 Confidence intervals for two-sample situations involving the normal distribution,
and the binomial and Poisson distributions using the normal approximation.
3.2.7 Confidence intervals for a difference between two means from paired data.
3.2.8 Bootstrap method to obtain confidence intervals.
3.3 Apply the concepts of hypothesis testing and goodness of fit: (Chapter 10)
3.3.1 Understand the concepts of null and alternative hypotheses, simple and
composite hypotheses, type I and type II errors, sensitivity, specificity, test
statistic, likelihood ratio, critical region, level of significance, probability value and
power of a test.
3.3.2 Use of basic tests for the one-sample and two-sample situations involving the
normal, binomial and Poisson distributions, and apply basic tests for paired data.
3.3.3 The permutation approach to non-parametric hypothesis tests.
3.3.4 Chi-square test to test the hypothesis that a random sample is from a particular
distribution, including cases where parameters are unknown.
3.3.5 A contingency (or two-way) table, and use a chi-square test to test the
independence of two classification criteria.
4 Regression theory and applications (30%)
Use of statistics to examine and make inferences about the relationships between two or
more data sets.
4.1 Understand and use linear regression models: (Chapter 12)
4.1.1 Response and explanatory variables.
4.1.2 Simple regression model (with a single explanatory variable) and multiple linear
regression model (with several explanatory variables).
4.1.3 Least squares estimates of the slope and intercept parameters in a simple linear
regression model.

4.1.4 Use of appropriate software to fit a linear regression model to a data set and
interpret the output:
 Perform statistical inference on the slope parameter.
 Describe the use of measures of goodness of fit of a linear regression
model.
 Use a fitted linear relationship to predict a mean response or an individual
response with confidence limits.
 Use residuals to check the suitability and validity of a linear regression
model.
4.1.5 Measures of model fit to select an appropriate set of explanatory variables.
4.2 Understand and use generalised linear models: (Chapter 13)
4.2.1 Binomial, Poisson, exponential, gamma and normal distributions as an
exponential family.
4.2.2 Mean, variance, variance function and scale parameter for a GLM for the
binomial, Poisson, exponential, gamma and normal distributions. Evaluate these
quantities for these distributions.
4.2.3 The link function and the canonical link function, referring to the distributions in
4.2.1.
4.2.4 Variables, factors taking categorical values and interaction terms.
4.2.5 Definition of the linear predictor, its form for simple models, including polynomial
models and models involving factors.
4.2.6 Deviance, scaled deviance and estimation of the parameters of a GLM.
4.2.7 Choice of a suitable model using an analysis of deviance and examination of the
significance of the parameters.
4.2.8 Pearson and deviance residuals and their use.
4.2.9 Statistical tests to determine the acceptability of a fitted model: Pearson’s

chi-square test and the likelihood-ratio test.
4.2.10 Fit a GLM to a data set and interpret the output.
5 Bayesian statistics (15%)

(Chapters 14, 15 and 16)
Use of Bayesian statistics to update prior beliefs about a data generating process.
5.1 Explain fundamental concepts of Bayesian statistics and use these concepts to calculate
Bayesian estimators:
5.1.1 Use of Bayes’ theorem to calculate simple conditional probabilities.
5.1.2 Prior distribution, posterior distribution and conjugate prior distribution.

5.1.3 Posterior distribution for a parameter in simple cases.

5.1.4 Use of simple loss functions to derive Bayesian estimates of parameters.
5.1.5 Credible intervals in simple cases.
5.1.6 Credibility premium formula and the role played by the credibility factor.
5.1.7 Bayesian approach to credibility theory and its use for calculating credibility
premiums in simple cases.
5.1.8 Empirical Bayes approach to credibility theory and its use for deriving credibility
premiums in simple cases.
5.1.9 Understanding the differences between the two approaches (Bayes v Empirical
Bayes) and the assumptions underlying each of them.

4 Core Reading
This section explains the role of the Core Reading and how it links to the Syllabus, supplementary
ActEd text and the examination.
4.1 Core Reading

The Core Reading has been produced by the Institute and Faculty of Actuaries. It supports
students in their learning and development of this subject by providing information and
explanation of the topics and objectives in the Syllabus.
The Core Reading is updated annually to reflect any changes to the Syllabus and current practice,
as well as for continuous improvement.
The current version of the Core Reading is up-to-date as of 31 May 2024. It references the version
of any legislation, standards, professional guidance, etc as of this date. Any known upcoming
changes to the references are noted where relevant in the Core Reading.
Accreditation
in the development of the material contained in the Core Reading.
Further reading
be found on the Module pages on the Institute and Faculty of Actuaries’ website:
4.2 Links to the Syllabus

Each part of the Core Reading relates directly to the Syllabus.
The relevant syllabus objectives are included at the start of each chapter for reference.
breadth are re-enforced.
4.3 Links to the examination

Examiners can set questions based on any area of the Syllabus within any examination sitting and
will consider and draw from the Core Reading when setting examinations questions.
Students will be expected to apply the Core Reading to scenarios and questions proposed by the
examiners.
The exams in April and September 2025 will be based on the Syllabus and Core Reading as at
31 May 2024. We recommend that you always use the up-to-date Core Reading to prepare for
the exams.

Past papers indicate to students how the examiners apply the Core Reading. The Examiners’
Reports provide further insight as to how students answered the questions and how marks were
awarded.
4.4 ActEd text

The Core Reading deals with each syllabus objective and covers what is needed to pass the exam,
and the Subject CS1 Course Notes include the Core Reading in full, integrated throughout the
course.
After allowing for chain-linking, the formula for the investment index then becomes:
This is
 Ni,t Pi,t ActEd
I (t )  i
B(t ) text
where Ni ,t is the number of shares issued for the ith constituent at time t; This is Core
Reading
Copyright
anybody else.

5 Skills and assessment
5.1 Technical skills

Subjects CS1 and CS2 are very mathematical and have relatively few questions requiring wordy
answers.
5.2 Exam skills

 Knowledge will be demonstrated through answering questions that assess understanding
 Application will be demonstrated through answering questions that assess the ability to
non-numerical).
 Higher order skills will be demonstrated through questions that will assess the ability to
In the CS subjects, the approximate split of assessment across the three skill types is:
 Knowledge – 20%
 Application – 65%
 Higher Order skills – 15%.
‘Explain’) to help students to identify what the question requires. The examination can be
The Institute and Faculty of Actuaries has produced guidance on ‘Command verbs used in the
Associate and Fellowship examinations’, to help students to understand what each command
verb is asking them to do.

5.3 Assessment
Assessment is in the form of two timed, online examinations:
 Paper A is 3 hours and 20 minutes and consists of a number of questions of varying marks,
for which the answers must be constructed and typed in Microsoft Word
 Paper B is 1 hour and 50 minutes and consists of a number of questions of varying marks,
for which the answers must typically be constructed using R and typed using Microsoft
Word.
This includes reading time, as well as the time taken for students to download and/or print the
question paper.
In order to pass this subject, both Paper A and Paper B must be sat within the same sitting, and a
combined mark of a pass achieved.
5.4 Further information

The Institute and Faculty of Actuaries has produced a number of documents, which it advises
students to read and understand. In particular, the:
 Qualification Handbook, which contains information on studying and preparing for exams,
as well as available support and resources
 Examinations Handbook, which contains practical assistance on how to sit an Institute and
Faculty of Actuaries’ examination
 Assessment Regulations document, which includes rules on eligibility, entry and conduct
The Examinations Handbook and Assessment Regulations document can be found at:
IMPORTANT NOTE: These documents may be updated and re-published in the weeks leading up
to each exam session. It is important that you keep up-to-date with any changes and
developments.

6 ActEd study support

An overview of ActEd’s products and services, and guidance on how to choose the best ones for
you, can be found on our website at ActEd.co.uk/productguide.
6.1 Summary of ActEd products and services

Detailed descriptions of all ActEd’s products and services can be found on our website at
ActEd.co.uk. However, the specific products and services available for Subject CS1 include:
 Course Notes
 Paper B Online Resources (PBOR), including the Y Assignments
 X Assignments – four assignments:
– X1, X2: 80-mark tests (you are allowed 2¾ hours to complete these)
– X3, X4: 100-mark tests (you are allowed 3¼ hours to complete these)
 Y Assignments – two assignments:
– Y1, Y2: 100-mark tests (you are allowed 1¾ hours to complete these)
 Series X Marking
 Series Y Marking
 Online Classroom – over 150 tutorial units
 Flashcards
 Revision Notes – seven A5 booklets
 ASET (2020-23 papers) – four years of exam papers, covering the period April 2020 to
September 2023
 Mini-ASET – covering the April 2024 exam paper
 Mock Exam – one 100-mark test for the Paper A examination and a separate 100-mark
test for the practical Paper B exam
 Additional Mock Pack (AMP) – two additional 100-mark Paper A tests and two additional
100-mark Paper B tests
 Mock Exam Marking
 Marking Vouchers.
about available eBooks, software requirements and restrictions.

6.2 Tuition
The following tutorials are typically available for Subject CS1:
 Regular Tutorials (four full days / eight half days)
 Block Tutorials (four days)
 a Preparation Day for the practical exam.
6.3 Questions and queries

From time to time you may come across something in the study material that is unclear to you.
Our online discussion forum at ActEd.co.uk/forums (or use the link from our home page at
ActEd.co.uk) is dedicated to actuarial students so that you can get help from fellow students on
any aspect of your studies from technical issues to study advice. ActEd tutors visit the site
regularly to ensure that you are not being led astray and we also post other frequently asked
questions from students on the forum as they arise.
If you are still stuck, then you can send queries by email to the Subject CS1 email address
CS1@bpp.com, but we recommend that you try the forum first. We will endeavour to contact
you as soon as possible after receiving your query but you should be aware that it may take some
time to reply to queries, particularly when tutors are running tutorials. At the busiest teaching
times of year, it may take us more than a week to get back to you.
personal tuition session with an ActEd tutor. Please email ActEd@bpp.com for more details.
6.4 Feedback
Otherwise, please send the details via email to the Subject CS1 email address CS1@bpp.com. Our
tutors work hard to ensure that the courses are as clear as possible and free from errors.
ActEd also works with the Institute and Faculty of Actuaries to suggest developments and

7 General information and support
7.1 Safeguarding
if you ever needed support, you know where to go.
7.2 BPP learning support

learning difficulty or disability. This support is accessible to all ActEd students free of charge.
Please contact BPP’s Learning Support team at LearningSupport@bpp.com for more information.
7.3 The Prevent Duty

The Prevent Duty is to protect people from radicalisation and being drawn into extremist views
and terrorism. As a Government-regulated training provider, ActEd has a duty to ensure that our
learners are well informed and stay safe, and to empower our students to know what to look for
and when to report concerns.
Please report any concerns to a tutor or email safeguarding@bpp.com or for urgent concerns call
07464 542 636.
More information is available at:

 ActEd.co.uk/learningsupport
 officeforstudents.org.uk/advice-and-guidance/student-wellbeing-and-
protection/counter-terrorism-the-prevent-duty/

All study material produced by ActEd is copyright and is sold
for the exclusive use of the purchaser. The copyright is
owned by Institute and Faculty Education Limited, a
subsidiary of the Institute and Faculty of Actuaries.
Unless prior authority is granted by ActEd, you may not hire

out, lend, give out, sell, store or transmit electronically or
photocopy any part of the study material.
You must take care of your study material to ensure that it

is not used or copied by anybody else.
Legal action will be taken if these terms are infringed. In

addition, we may seek to take disciplinary action through
the Institute and Faculty of Actuaries or through your
employer.
These conditions remain in force after you have finished

using the course.

SP9: Study Guide Page 1
Subject SP9
2024 Study Guide
Introduction
This Study Guide has been created to help you navigate your way through Subject SP9. It contains
all the information you will need before starting to study Subject SP9 for the 2024 exams and you
may also find it useful to refer to throughout your studies.
The guide is split into two parts:

· Part 1 contains specific information about Subject SP9
· Part 2 contains general information about the Specialist Principles (SP) subjects.
for some actuarial exams before. While you may have already read (the majority of) the Part 2
material in previous subjects, the information in Part 1 is specific to this course.
Contents
Part 1 Section 1 Subject SP9 – background and contents Page 2
Section 2 Subject SP9 – Syllabus and Core Reading Page 4
Section 3 Subject SP9 – summary of ActEd products Page 12
Section 4 Subject SP9 – skills and assessment Page 13
Section 5 Subject SP9 – frequently asked questions Page 14
Part 2 Section 1 General information and support Page 16
Section 2 Core study material Page 18
Section 4 Study skills and assessment Page 27
Section 5 Queries and feedback Page 33

Page 2 SP9: Study Guide
1.1 Subject SP9 – background and contents
History
The Specialist Principles subjects were introduced in the Institute and Faculty of Actuaries’ 2019
Curriculum. Subject SP9 is Enterprise Risk Management.
Predecessors
The Specialist Principles subjects cover content that was previously in the equivalent Specialist
Technical subjects. So, Subject SP9 replaces Subject ST9.
Exemptions
· In order to be eligible for a pass in Subject SP9, you will need to have met the Institute
and Faculty of Actuaries’ requirements based on the current curriculum.
See the Institute and Faculty of Actuaries’ website for further details:
actuaries.org.uk/qualify/exam-exemptions
Links to other subjects

Associate Qualification
Enterprise Risk Management (ERM) draws from across Associate Qualification subjects, in
particular:
· foundational statistical modelling techniques developed in Risk Modelling and Survival
Analysis (Subject CS2)
· the principles of actuarial modelling as used in the quantitative measures of risk in
Economic Modelling (Subject CM2).
Understanding the nature of risks and how to manage these risks is vital for business entities and
other organisations. Actuarial Practice (Subject CP1) provides a fundamental background to
different types of risk from an actuarial perspective and how these risks can be managed.
Chartered Enterprise Risk Actuary (CERA)
Chartered Enterprise Risk Actuary (CERA) is a global credential for risk management professionals.
It is awarded by the IFoA on behalf of the CERA Global Association (CGA).
Contents
There are six parts to the Subject SP9 course. The parts cover related topics and are broken down
into modules. At the end of each part there is an assignment testing the material from that part.
The following table shows how the parts and modules relate to each other. The final column
shows how the modules relate to the days of the regular tutorials. This table should help you plan

No of X Tutorial –
Part Module Title
pages Assignment 3 days
1 What is ERM? 17
2 Why (E)RM? 15
3 Risk taxonomy 37
1 4 How to do ERM – internal risk frameworks 30 X1
5 Risk frameworks (mandatory) 29
6 Risk frameworks (advisory) 15
7 Risk frameworks (proprietary) 28
1
8 ERM processes and structures 19
9 Risk policy 27
10 Monitoring and communication of risk 21
2 11 Stakeholders 25 X2
12 Governance functions and the role of the CRO 32
13 Business analysis, risk id and initial assessment 40
14 Introduction to risk measurement 38
15 Introduction to risk modelling 39
16 Statistical distributions 49
3 17 Time series analysis 36 X3
18 Copulas 50
19 Fitting models 37
20 Extreme value theory 31 2
21 Use of models in ERM 22
22 Assessment of market risks 28
4 X4
23 Assessment of credit risks 35
24 Assessment of operational risks 26
25 Assessment of other risks 29
26 Risk optimisation and risk responses 37
27 Management of market risk 42
5 X5
28 Management of credit risk 33
29 Management of operational and other risks 33
30 Capital management 63 3
31 ERM implementation 23
X6
6 32 Case studies 50
33 Principal terms 22
34 References and Further reading 6 N/A

1.2 Subject SP9 – Syllabus and Core Reading
Syllabus
The Syllabus for Subject SP9 is given here. To the right of each objective are the module numbers
in which the objective is covered in the ActEd course.
Aim
The aim of Subject SP9 is to gain a detailed understanding of the main principles of Enterprise Risk
Management (ERM) within an organisation, including governance and process, as well as
quantitative methods of risk measurement and modelling. This subject is a requirement to attain
the Chartered Enterprise Risk Actuary (CERA), credential.
Topics and topic weightings

1. ERM concept and framework (15%)
2. ERM process (10%)
3. Risk categories and identification (10%)
4. Risk modelling and aggregation of risks (15%)
5. Risk measurement and assessment (15%)
6. Risk management tools and techniques (20%)
7. Capital management (15%)
that topic.
Students will be expected to be able to apply knowledge and skills from across the syllabus topics
to scenarios and questions proposed by the examiners and produce coherent solutions and
actions, including:
· analysing complex problems in terms of actuarial, economic and financial factors to a level
where appropriate analytical techniques may be used
· assessing the implications and relevance of such factors, integrating the results into a
coherent whole
· evaluating the results critically in a wider context, drawing appropriate conclusions
· proposing solutions and actions, or a range of possible solutions and actions, based on
this evaluation.

Objectives
1. Enterprise Risk Management (ERM) concept and framework (15%)
An introduction of the key principles and concepts of ERM, how it is applied in an

organisation, and how external and regulatory risk frameworks can influence an
organisation’s approach to ERM.
1.1 Explain the principal terms in Enterprise Risk Management (ERM).

(Modules 1 to 5)
1.2 Describe the concept of ERM. (Modules 1 and 2)
1.2.1 Define what is meant by ERM.
1.2.2 Describe the role of the following concepts in ERM:

• the holistic approach
• downside and upside risks
• measurement of risk
• unquantifiable risks
• responses to risk, and risk management.
1.2.3 Describe the benefits of ERM.
1.3 Discuss the framework for risk management and control within a company.
(Modules 4, 10, 12, 13 and 31)
1.3.1 Recommend an appropriate framework for an organisation’s ERM.
1.3.2 Propose best practice ERM approaches in compliance and corporate governance.
1.3.3 Discuss governance issues including market conduct, audit, and legal risk.
1.3.4 Evaluate an organisation’s risk management culture, including risk awareness,

accountabilities, collaboration, incentive compensation, communication and the
problem of bias.

1.4 Demonstrate an understanding of risk frameworks in regulatory environments.

(Modules 5 and 6)
1.4.1 Explain the role of regulators in ERM and effective management of the supervisor
relationship.
1.4.2 Describe the Basel Accord and Solvency II frameworks, including their underlying
principles and approaches to risk measurement.
1.4.3 Outline the requirements of Sarbanes-Oxley and other regulatory risk frameworks
and their underlying principles.
1.4.4 Demonstrate an awareness of how different parts of an organisation and different

parts of a portfolio may be subject to different capital adequacy standards.
1.5 Demonstrate an understanding of the perspectives of credit rating agencies.

(Module 7)
1.5.1 Describe the role of credit rating agencies in the evaluation of risk management
functions, including the risk management grading criteria used.
1.5.2 Assess the relevance of these criteria.
2. ERM process (10%)
Implementation of an ERM framework across an organisation with consideration of key

stakeholders, and both operational and strategic issues, and reviews past real-life
examples.
2.1 Demonstrate an understanding of the relevance of ERM to all stakeholders.

(Modules 3 and 11)
2.1.1 Compare the relevance of risk measurement and management to various

stakeholders.
2.1.2 Explain contagion and how it affects different stakeholders.
2.1.3 Explain the risks arising from any misalignment of interests between different
groups of stakeholders.
2.2 Demonstrate how to determine and articulate risk appetite, risk capacity, risk
tolerances, desired risk profile and risk objectives. (Modules 9 and 10)
2.3 Evaluate the elements and structure of a successful risk management function.
(Modules, 8, 11 and 12)
2.3.1 Describe the ERM roles and responsibilities of the people within an organisation
and how the different groups should interact.
2.3.2 Recommend a structure for an organisation’s risk management function.

2.4 Assess the implications of financial and other risks and opportunities for strategic
planning and the selection of strategy. (Module 8)
2.5 Demonstrate the application of the risk management control cycle, including the
relevance of external influences and emerging risks, such as climate risk and
cyber risk. (Modules 8, 10, 13 and 26)
2.6 Describe methods for the identification of risks and their causes and implications.
(Module 13)
2.7 Discuss important past examples of both good risk management practices and of
risk failures, for financial and non-financial entities, including proposing solutions
for how better risk management might have prevented these failures. (Module 32)
2.8 Propose an ERM process that creates value for an organisation. (Module 32)
3. Risk categories and identification (10%)
How risks can be defined and classified, including any difficulties that may arise.
3.1 Explain what is meant by risk and uncertainty, including different definitions and
concepts of risk. (Module 3)
3.2 Demonstrate an understanding of risk categories. (Module 3)
3.2.1 Identify the risks faced by an entity, including market risk, economic risk, interest
rate risk, foreign exchange risk, basis risk, credit risk, counterparty risk, liquidity
risk, insurance risk, operational risk, environmental risk, legal risk, regulatory risk,
political risk, agency risk, reputational risk, project risk, strategic risk, demographic
risk, moral hazard.
3.2.2 Analyse the financial and non-financial risk exposure arising from an
organisation’s current and emerging risks, including climate risk and cyber risk,
within a given context.
3.2.3 Discuss risk taxonomy, including an awareness of how individual risks might be
categorised in different ways.
3.3 Describe the relationship between systematic risk, non-systematic or specific risk,
and concentration of risk. (Module 3)
4. Risk modelling and aggregation of risks (15%)
How risks can be modelled in practice, and how suitable models can be used as part of the
overall ERM process, including the risks that are introduced by their use.
4.1 Assess the extent to which each of the risks in 3.2.1 can be amenable to
quantitative analysis. (Module 15)
4.2 Demonstrate an understanding of the use of correlation measures. (Module 15)

4.2.1 Demonstrate enterprise-wide risk aggregation techniques incorporating the use

of correlation.
4.2.2 Comment on the relative merits and implications of different correlation

measures.
4.3 Discuss the use of scenario analysis and stress testing in the risk measurement
process, including the advantages and disadvantages of each.
4.4 Demonstrate understanding of the use of copulas as part of the process of

modelling multivariate risks. (Module 18)
4.4.1 Evaluate different types of copula for a given purpose.
4.4.2 Recommend an appropriate copula for a given situation.
4.5 Explain the importance of the tails of distributions, tail correlations and low
frequency / high severity events. (Module 20)
4.6 Demonstrate how extreme value theory can be used to help model risks that have
a low probability. (Module 20)
4.7 Demonstrate an understanding of model and parameter risk. (Module 21)
4.8 Discuss the use of models in the overall ERM decision-making process.
(Module 21)
4.8.1 Describe the development and use of models for decision-making purposes
in ERM.
4.8.2 Explain how the decision-making process takes account of the organisation’s risk
appetite and corporate governance, and builds on the results of stochastic
modelling, scenario analysis, stress testing and analysis of model and
parameter risk.
4.8.3 Evaluate different types of model for a given purpose.
5. Risk measurement and assessment (15%)
The different types of assessing risk, building on concepts from earlier topics, and
considering the different risk types.
5.1 Understand common risk measures. (Module 14)
5.1.1 Describe the properties and limitations of the following risk measures:
• Value at Risk (VaR)
• Tail Value at Risk (TVaR)
• Probability of ruin
• Expected shortfall.

5.1.2 Determine risk exposures and tolerances using these measures.
5.2 Describe how to choose a suitable time horizon and risk discount rate.
(Module 14)
5.3 Analyse univariate and multivariate financial and insurance data (including asset
prices, credit spreads and defaults, interest rates and insurance losses) using
appropriate statistical methods. (Modules 16 and 17)
5.4 Recommend a specific choice of model based on the results of both quantitative
and qualitative analysis of financial or insurance data. (Modules 16, 17 and 19)
5.5 Assess different types of market risk. (Module 22)
5.6 Assess credit risk. (Module 23)
5.6.1 Describe what is meant by a credit spread and its components.
5.6.2 Discuss different approaches to modelling credit risk.
5.7 Assess operational, liquidity and insurance risks. (Modules 24 and 25)
6. Risk management tools and techniques (20%)
Understand how assessed risks can be managed and optimised and considers risk
management approaches specific to different types of risk.
6.1 Demonstrate risk optimisation and responses to risk. (Module 26)
6.1.1 Explain how to optimise an objective, possibly subject to constraints.
6.1.2 Demonstrate risk optimisation and responses to risk using illustrative examples.
6.1.3 Analyse the risk and return trade-offs that result from changes in the
organisation’s risk profile.
6.2 Recommend approaches, which balance benefits against inherent costs, that can
be used to manage an organisation’s overall risk profile. (Module 26)
6.2.1 Describe how to reduce risk by transferring it.
6.2.2 Describe how to reduce risk without transferring it.
6.2.3 Analyse the residual risks and new risks arising following risk mitigation actions.
6.2.4 Explain how an organisation’s ability to manage risk is affected by regulatory,

capacity and cost constraints.
6.2.5 Explain how an organisation will choose to accept certain risks, and the controls it
might adopt for these retained and residual risks.
6.3 Demonstrate strategies for the management of market risk. (Module 27)
6.3.1 Recommend strategies for the reduction of market risk using financial derivatives.

6.3.2 Demonstrate an awareness of the practical issues related to market risk hedging,
including dynamic hedging.
6.4 Demonstrate the use of tools and techniques for identifying and managing credit
and counterparty risk. (Module 28)
6.5 Demonstrate possible strategies for the management of operational, liquidity,

insurance and other key risks. (Module 29)
7. Capital management (15%)
Understand how risk models can be used to allocate capital across an organisation.
7.1 Demonstrate an understanding of and perform capital calculations. (Module 30)
7.1.1 Describe the concept of economic measures of value and capital, and their uses in
corporate decision-making processes.
7.1.2 Evaluate different risk measures and capital assessment approaches.
7.1.3 Demonstrate the ability to develop a capital model for a representative

financial firm.
7.2 Propose techniques for allocating capital across an organisation. (Module 30)
Core Reading
The Subject SP9 Course Notes include the Core Reading in full, integrated throughout the course.
Accreditation
The Core Reading makes extensive reference to the following:

· Enterprise Risk Management From Incentives to Controls – Second edition – James Lam.
Wiley, 2014. ISBN-10: 111841361X, ISBN-13: 978-1118413616
· Financial Enterprise Risk Management – Second edition – Paul Sweeting.
Cambridge University Press, 2017. ISBN-10: 1107184614, ISBN-13: 978-1107184619
· Note on Enterprise Risk Management for Capital and Solvency Purposes in the Insurance
Industry – International Actuarial Association
Published 31 March 2009
· Insurance Criteria: Evaluating the Enterprise Risk Management Practices of Insurance
Companies – Standard & Poor’s.
The latter two papers are reproduced in full in the CMP and can also be found on the Institute and
Faculty of Actuaries website.
The referenced material is cited, where relevant, throughout the Course Notes, and forms part of
the Core Reading.

Further reading
The exam will be based on the relevant Syllabus and Core Reading and the ActEd course material
will be the main source of tuition for candidates.
be found on the IFoA website:
If a candidate is using the online version of the core reading, the resources are also available in
the same area as the core reading on the IFoA Virtual Learning Environment (VLE):
vle.actuaries.org.uk
The resources listed on the IFoA website and VLE are hyperlinked to their source publication or
the IFoA Library. Where a resource is available through the IFoA Library, members, students and
affiliates can ‘request’ from the IFoA Library Service, subject to availability.
Occasional references to other reading and websites that you may find interesting or useful are
also given in the Course Notes.

1.3 Subject SP9 – summary of ActEd products

The following products are available for Subject SP9:
· Course Notes
· X Assignments – six assignments:
– X1-X3: 80-mark tests (you are allowed 2¾ hours to complete these)
– X4-X6: 100-mark tests (you are allowed 3¼ hours to complete these)
· Series X Marking
· Flashcards
· Revision Notes – seven A5 booklets
· ASET (2020-23 papers) – four years of exam papers, ie eight sittings, covering the period
April 2020 to September 2023
· Mini ASET – covering the April 2024 exam paper
· Mock Exam – one 100-mark test
· Additional Mock Pack (AMP) – two additional 100-mark tests
· Mock Exam Marking
· Marking Vouchers.
about available eBooks, software requirements and restrictions. ActEd is unable to provide eBook
versions of the textbooks, however these may be available from other bookstores.
The following tutorials are typically available for Subject SP9:

· Regular Tutorials (three full days / six half days)
· Block Tutorials (three days).

1.4 Subject SP9 – skills and assessment
Exam skills
In Subject SP9, the approximate split of assessment across the three skill types is:
· Knowledge – 15%
· Application – 55%
· Higher Order skills – 30%.
These skill types are described in Section 2.4.
Assessment
Assessment is in the form of a 3 hour 20 minute timed, online examination. This includes reading
time, as well as the time taken for students to download and/or print the question paper.
Answers must be constructed and typed in Microsoft Word.

1.5 Subject SP9 – frequently asked questions

Q: What is covered by the SP9 syllabus?
A: The full Syllabus for Subject SP9 is included earlier in this guide.
Q: How technical is the SP9 course?
A: Although largely a discursive course, SP9 does contain some highly technical material
relating to quantitative risk measurement. SP9 builds on some material introduced in
earlier subjects (CS1, CS2, CM2 and CP1). Whilst it is unlikely that you will be asked to
prove / derive results, it is likely that you will be asked to perform calculations and
interpret / comment on results.
There are a number of other less technical areas that offer some scope for numerical
questions, eg analysis of a set of accounts.
Q: Where do I start studying for SP9?
A: The introduction to each module lists the relevant reading for that module and this
approach will take you through the course step-by-step.
If you prefer to get a rapid introduction to ERM and see the big picture from the start, we
suggest you read Lam first in its entirety without worrying about learning it or taking extensive
notes. You can then review the relevant sections of Lam as you meet them in the course.
Q: Do I need to study all of the recommended texts and additional readings?
A: The Core Reading References section states: ‘For many syllabus objectives more than one
of the above source texts is recommended. As part of the analysis of the subject,
candidates are expected to be able to compare and contrast the views of different
authors.
Additional reading recommended within the source texts (eg ‘Further reading’ references
in Sweeting) does not form part of the required reading for SP9 and is not examinable
(unless it is explicitly listed elsewhere within this Core Reading, eg Lam).
The questions at the end of each Chapter of Sweeting are also not part of the required
reading and are not intended to represent possible SP9 examination questions.’
Q: Do I need to study the end of chapter questions in Sweeting?
A: Only if you want to. As mentioned above, the Core Reading References section states
that ‘questions at the end of each Chapter of Sweeting are also not part of the required
reading and are not intended to represent possible SP9 examination questions.’

Q: What should I do if I discover an error in the course?
A: If you find an error in the course, please check our website at:
ActEd.co.uk/paper_corrections.html
to see if the correction has already been dealt with. Otherwise please send details via
email to SP9@bpp.com.
Q: Who should I send feedback to?
A: We are always happy to receive feedback from candidates, particularly details concerning
any errors, contradictions or unclear statements in the courses.
If you have any comments on this course in general, please email them to SP9@bpp.com.
If you have any comments or concerns about the Syllabus or Core Reading, these can be
passed on to the Institute and Faculty of Actuaries via ActEd. Alternatively, you can send
them directly to the Institute and Faculty of Actuaries’ Examination Team by email to

2.1 General information and support
Before you start

When studying for the Institute and Faculty of Actuaries’ exams, you will need:
· a copy of the Formulae and Tables for Examinations of the Faculty of Actuaries and the
Institute of Actuaries, 2nd Edition (2002) – these are referred to simply as the Tables
· a scientific calculator and/or software package to help with calculations.
actuaries.org.uk.
Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries has produced a Qualification Handbook containing
important information and guidance on:
· requirements for qualifying as an Associate or Fellow
· preparing for the exams, including how to book them
· the regulations, policies and procedures to be aware of while studying
· the range of support and resources available to students when they join the Institute and
Faculty of Actuaries.
The Institute and Faculty of Actuaries advises students to ensure they read through the
Qualification Handbook.
BPP learning support

learning difficulty or disability, including sensory difficulties, mobility difficulty, ADHD, Asperger
Syndrome, mental health difficulties, dyslexia, dyspraxia and general health problems. This
support is accessible to all ActEd students free of charge.
This support includes:

· accessible and inclusive learning facilities
· a dedicated team that provides information, advice, guidance and support.
Please contact the Learning Support team at LearningSupport@bpp.com for more information.
Safeguarding
Safeguarding means protecting people’s health, wellbeing and human rights, and enabling them
to live free from harm, abuse and neglect.

For ActEd, safeguarding is recognising when someone needs support to help them achieve their
learning goals while maintaining their safety, both face-to-face and online.
if you ever needed support, you would know where to go.

2.2 Core study material

This section explains the role of the Syllabus, Core Reading and supplementary ActEd text. It also
gives guidance on how to use these materials most effectively in order to pass the exam.
Some of the information below is also contained in the introduction to the Core Reading
produced by the Institute and Faculty of Actuaries.
Syllabus
The Syllabus for Subject SP9 has been produced by the Institute and Faculty of Actuaries. The
relevant individual syllabus objectives are included at the start of each course module and a
complete copy of the Syllabus is included in Section 1.2 of this Study Guide. We recommend that
you use the Syllabus as an important part of your study.
Core Reading
The Core Reading has been produced by the Institute and Faculty of Actuaries. The purpose of
the Core Reading is to ensure that tutors, candidates and examiners understand the requirements
of the Syllabus for the qualification examinations for Fellowship of the Institute and Faculty of
Actuaries.
breadth are re-enforced. It is therefore important that candidates have a good understanding of
the concepts covered by the Core Reading.
The examinations require candidates to demonstrate their understanding of the concepts given in
the Syllabus and described in the Core Reading; this will be based on the legislation, professional
guidance, etc that are in force when the Core Reading is published, ie on 31 May in the year
preceding the examinations.
Therefore, the exams in April and September 2024 will be based on the Syllabus and Core Reading
as at 31 May 2023. We recommend that you always use the up-to-date Core Reading to prepare
for the exams.
Examiners will have this Core Reading when setting the examinations. In preparing for
examinations, candidates are advised to work through past examination questions and may find
additional tuition helpful. The Core Reading will be updated each year to reflect changes in the
Syllabus and current practice, and in the interest of clarity.
Accreditation
in the development of the material contained in this Core Reading.

ActEd text
Core Reading deals with each syllabus objective and covers what is needed to pass the exam.
After allowing for chain-linking, the formula for the investment index then becomes:This is
ActEd
å Ni,t Pi ,t text
I (t ) = i
B(t ) This is Core
Reading
where Ni ,t is the number of shares issued for the ith constituent at time t;
Copyright
anybody else.

2.3 ActEd study support

This section gives a description of the products offered by ActEd.
Successful candidates tend to undertake three main study activities:

1. Learning – initial study and understanding of subject material
2. Revision – learning subject material and preparing to tackle exam-style questions
3. Rehearsal – answering exam-style questions, culminating in answering questions at exam
speed.
Different approaches suit different people. For example, you may like to revise material gradually
over the months running up to the exams or you may do your revision in a shorter period just
before the exams. Also, these three activities will almost certainly overlap.
We offer a flexible range of products to suit you and let you control your own learning and exam
preparation. The following table shows the products that we produce. Not all products are
available for all subjects.
LEARNING LEARNING & REVISION REVISION & REHEARSAL

REVISION REHEARSAL
Course Notes X Assignments Flashcards Revision Notes Mock Exam
Combined Sound Revision ASET Additional Mock

Materials Pack Pack (AMP)
(CMP)
Mock Marking
X Assignment
Marking
Tutorials
Online
Classroom
The products and services are described in more detail below.

‘Learning’ products
Course Notes
The Course Notes will help you develop the basic knowledge and understanding of principles
needed to pass the exam. They incorporate the complete Core Reading and include full
explanation of all the syllabus objectives, with worked examples and questions (including some
past exam questions) to test your understanding.
Each module includes:

· the relevant syllabus objectives
· a module summary
· practice questions with full solutions.
‘Learning & revision’ products

X Assignments
The Series X Assignments are assessments that cover the material in each part of the course in
turn. They can be used to develop and test your understanding of the material.
The X Assignments come with full marking schedules. We are happy to mark your scripts, but
marking must be purchased separately.
Combined Materials Pack (CMP)
The Combined Materials Pack (CMP) comprises the Course Notes, the Series X Assignments and a
Mock Exam.
CMP Upgrade
The purpose of the CMP Upgrade is to enable you to amend last year’s study material to make it
suitable for study for this year.
Wherever possible, it lists the changes to the syllabus objectives, Core Reading and the ActEd
material since last year that might realistically affect your chance of success in the exam. It is
produced so that you can manually amend your notes. The upgrade includes replacement pages
and additional pages where appropriate.
However, if a large number of changes have been made to the Course Notes and X Assignments, it
is not practical to produce a full upgrade, and the upgrade will only outline the most significant
changes. In this case, we recommend that you purchase a replacement CMP (printed copy or
eBook) or Course Notes at a significantly reduced price.
The CMP Upgrade can be downloaded free of charge from our website at ActEd.co.uk.
A separate upgrade for eBooks is not produced but a significant discount is available for retakers
wishing to re-purchase the latest eBook.

X Assignment Marking
We are happy to mark your attempts at the X assignments. Marking is not included with the
Assignments or the CMP and you need to order it separately
IMPORTANT NOTE: You must submit your script on our virtual learning environment, ‘The Hub',
in the format detailed in your assignment instructions. You will also be able to download your
marked script, including marker feedback, from The Hub, as well as being given the opportunity
to provide comments on the quality of the marking.
Don’t underestimate the benefits of attempting and submitting assignments for marking:
· Question practice during this phase of your study gives an early focus on the end goal of
answering exam-style questions.
· You’re incentivised to keep up with your study plan and get a regular, realistic assessment
of your progress.
· Objective, personalised feedback from a high quality marker will highlight areas on which
to work and help with exam technique.
In a recent study, we found that candidates who attempt all the assignments and mock exams
and get them marked have significantly higher pass rates.
There are two different types of marking product: Series Marking and Marking Vouchers.
Series Marking
Series Marking applies to a specified subject, session and candidate. If you purchase Series
Marking, you will not be able to defer the marking to a future exam sitting or transfer it to a
different subject or candidate.
We typically provide full solutions with the Series X Assignments. However, if you order Series
Marking at the same time as you order the Series X Assignments, you can choose whether or not
to receive a copy of the solutions in advance. If you choose not to receive them with the study
material, you will be able to download the solutions from the Hub when your marked script is
returned (or following the final deadline date if you do not submit a script).
If you are having your attempts at the assignments marked by ActEd, you should submit your scripts
regularly throughout the session, in accordance with the schedule of recommended dates set out
on our website at ActEd.co.uk. This will help you to pace your study throughout the session and
leave an adequate amount of time for revision and question practice.
The recommended submission dates are realistic targets for the majority of candidates. Your
scripts will be returned more quickly if you submit them well before the final deadline dates.
Any script submitted after the relevant final deadline date will not be marked. It is your
responsibility to ensure that we receive scripts in good time.

Marking Vouchers
Marking Vouchers give the holder the right to submit a script for marking at any time, irrespective of
the individual assignment deadlines, study session, subject or student.
Marking Vouchers can be used for any assignment. They are valid for four years from the date of
purchase and can be refunded at any time up to the expiry date.
Although you may submit your script with a Marking Voucher at any time, you will need to adhere
to the explicit Marking Voucher deadline dates to ensure that your script is returned before the date
of the exam. The deadline dates are provided on our website at ActEd.co.uk.
Tutorials
Our tutorials are specifically designed to develop the knowledge that you will acquire from the
course material into the higher-level understanding that is needed to pass the exam.
We run a range of different tutorials including face-to-face tutorials at various locations, and Live
Online tutorials. Full details are set out in our Tuition Bulletin, which is available on our website at
ActEd.co.uk.
Regular and Block Tutorials
In preparation for these tutorials, we expect you to have read the relevant part(s) of the Course
Notes before attending the tutorial so that the group can spend time on exam-style questions and
discussion to develop understanding rather than basic bookwork.
You can choose one of the following types of tutorial:

· Regular Tutorials spread over the session
· A Block Tutorial held two to eight weeks before the exam.
‘Revision’ products
Flashcards
Flashcards are a set of A6-sized cards that cover the key points of the subject that most
candidates want to commit to memory and/or have handy for reference during the examination.
Each flashcard has questions on one side and the answers on the reverse. We recommend that
you use the cards actively and test yourself as you go.
Sound Revision
It is reported that only 30% of information that is read is retained but this rises to 50% if the
information is also heard. Sound Revision is a set of audio files, designed to help you absorb the
most important aspects of the Core Reading.
The files cover the majority of the course, split into a number of manageable topics based on the
chapters in the Course Notes. Each section lasts no longer than a few minutes.

Choice of revision product
Different candidates will have preferences for different revision products.
So, what might influence your choice between these study aids? The following questions and
comments might help you to choose the revision products that are most suitable for you:
· Do you have a regular train or bus journey?

Flashcards are ideal for regular bursts of revision on the move.
· Do you want to fit more study into your routine?

Flashcards are a good option for ‘dead time’, eg using flashcards on your phone or sticking
them on the wall in your study.
· Do you find yourself cramming for exams (even if that’s not your original plan)?
Flashcards are an extremely efficient way to do your pre-exam preparation.
· Do you have some regular time where carrying other materials isn’t practical,
eg commuting, at the gym, walking the dog?
Sound Revision is an ideal ‘hands-free’ revision tool.
· Do you have a preference for auditory learning, eg do you remember conversations more
easily than emails?
Sound Revision will suit your preferred style and be especially effective for you.
Choosing more than one revision product
As there is some degree of overlap between revision products, we do not necessarily recommend
using them simultaneously. However, if you are retaking a subject, then you might consider using
a different product than on a previous attempt to keep your revision fresh and effective.
‘Revision & rehearsal’ products

Revision Notes
Our Revision Notes have been designed with input from candidates to help you revise efficiently.
They are suitable for first-time sitters who have worked through the ActEd Course Notes or for
retakers (who should find them much more useful and challenging than simply reading through
the course again).
The Revision Notes are a set of A5 booklets – perfect for revising in places where taking large
amounts of study material with you is not practical. Each booklet covers one main theme or a set
of related topics from the course and includes:
· Core Reading with a set of integrated short questions to develop your knowledge
· relevant past exam questions with concise solutions from the last ten years
· other useful revision aids.

ActEd Solutions with Exam Technique (ASET)
The ActEd Solutions with Exam Technique (ASET) contains our solutions to a number of past exam
papers, plus comment and explanation. In particular, it highlights how questions might have been
analysed and interpreted so as to produce a good solution with a wide range of relevant points.
This will be valuable in approaching questions in subsequent examinations.
Choice of revision & rehearsal product
Different students will have preferences for different revision & rehearsal products, and there is
some overlap in that both the Revision Notes and ASET contain past exam paper questions from
recent years. However:
· ASET is designed to be educational. It aims to allow you to fully understand the solution
points, and to assist you in improving your own answers through focussed explanations
and tips on tackling the questions.
It is likely to be most appropriate if you are attempting the questions by producing
answers in full, eg under exam conditions.
· The past exam question and solution sections of the Revision Notes are designed to give
you a greater volume of question practice. They allow you to focus on specific topic areas
one at a time.
They are likely to be most appropriate if you are using the questions to develop and practise your
idea generation techniques, enabling you to work quickly through more questions than if you
were producing full, detailed answers.
‘Rehearsal’ products
Mock Exam
The Mock Exam is a 100-mark mock exam paper that provides a realistic test of your exam
readiness.
It is based on the Mock Exam from last year but it has been updated to reflect any changes to the
Syllabus, Core Reading and examination format.
The Mock Exam comes with a full marking schedule. We are happy to mark your scripts, but
marking must be purchased separately.
Additional Mock Pack (AMP)
The Additional Mock Pack (AMP) consists of two further 100-mark mock exam papers – Mock
Exam 2 and Mock Exam 3. This is ideal if you are retaking and have already sat the Mock Exam, or
if you just want some extra question practice.
Mock Exam 2 and Mock Exam 3 come with full marking schedules. We are happy to mark your
scripts, but marking must be purchased separately.

Mock Marking
We are happy to mark your attempts at the mock exams. The same general principles apply as for
the X Assignment Marking. In particular:
· Mock Exam Marking applies to a specified subject, session and candidate
· Marking Vouchers can be used for each mock exam paper. Marking vouchers have to be
used for marking the AMP exam papers and can be used for marking the Mock Exam.
Recall that:
· marking is not included with the products themselves and you need to order it separately
· you should submit your script via the Hub in the format detailed in the mock exam
instructions
· you will be able to download the feedback on your marked script, the solutions if you
have Mock Exam Marking, and provide comments on the quality of the marking via The
Hub.

2.4 Study skills and the assessment
The Subject SP exams

It is important to recognise that the SP subject exams are very different from the Core Principles
subject exams in both the nature of the material covered and the skills being examined.
Both the Core Reading and the exam papers themselves are generally much less numerical and
more ‘wordy’ than the Core Principles subjects. The exam will primarily require you to explain a
particular point in words and sentences, rather than to manipulate formulae or perform
calculations. Numerical questions typically account for only a small part of each exam paper. If
you haven’t sat this type of exam for some time, you need to start practising again now. Many
candidates find that it takes time to adjust to the different style of the SP subject exam questions.
As ever, practice is the key to success.
The aim of the exams is to test your ability to apply your knowledge and understanding of the key
principles described in the Core Reading to specific situations presented to you in the form of
exam questions. Therefore your aim should be to identify and understand the key principles, and
then to practise applying them. You will also need to be thoroughly familiar with the Core
Reading to score well and quickly on any knowledge-based questions.
Study skills
Overall study plan
We suggest that you develop a realistic study plan, building in time for relaxation and allowing
some time for contingencies. Be aware of busy times at work, when you may not be able to take
as much study leave as you would like. Once you have set your plan, be determined to stick to it.
You don’t have to be too prescriptive at this stage about what precisely you do on each study day.
The main thing is to be clear that you will cover all the important activities in an appropriate
manner and leave plenty of time for revision and question practice.
Aim to manage your study so as to allow plenty of time for the concepts you meet in this course
to ‘bed down’ in your mind. Most successful candidates will probably aim to complete the course
at least six weeks before the exam, thereby leaving a sufficient amount of time for revision. By
finishing the course as quickly as possible, you will have a much clearer view of the big picture. It
will also allow you to structure your revision so that you can concentrate on the important and
difficult areas of the course.
You can also try looking at our discussion forum, which can be accessed at ActEd.co.uk/forums
(or use the link from our home page at ActEd.co.uk). There are some good suggestions from
candidates on how to study.
Study sessions
Only do activities that will increase your chance of passing. Try to avoid including activities for the
sake of it and don’t spend time reviewing material that you already understand. You will only
improve your chances of passing the exam by getting on top of the material that you currently
find difficult.

In particular, you may already be familiar with the content of some of the modules (from the Core
Principles (CS, CM or CB subjects), Subject CP1 or other SP subjects). Try to cover these modules
quickly to give yourself more time on the material with which you are less comfortable. Where
modules refer back to material from the Core Principles subjects, you don’t have to follow these
links up unless you are feeling curious or clueless.
Ideally, each study session should have a specific purpose and be based on a specific task,
eg ‘Finish reading Module 3 and attempt Practice Questions 3.4, 3.7 and 3.12’, as opposed to a
specific amount of time, eg ‘Three hours studying the material in Module 3’.
Try to study somewhere quiet and free from distractions (eg an area at home dedicated to study).
Find out when you operate at your peak, and endeavour to study at those times of the day. This
might be between 8am and 10am or could be in the evening. Take short breaks during your study
to remain focused – it’s definitely time for a short break if you find that your brain is tired and
that your concentration has started to drift from the information in front of you.
Order of study
We suggest that you work through each of the modules in turn. To get the maximum benefit from
each module you should proceed in the following order:
1. Read the syllabus objectives. These are set out in the box at the start of each module.
2. Read the Module Summary at the end of each module. This will give you a useful overview
of the material that you are about to study and help you to appreciate the context of the
ideas that you meet.
3. Study the Course Notes in detail, annotating them and possibly making your own notes. Try
the self-assessment questions as you come to them. As you study, pay particular attention
to the listing of the syllabus objectives and to the Core Reading.
4. Read the Module Summary again carefully. If there are any ideas that you can’t
remember covering in the Course Notes, read the relevant section of the notes again to
refresh your memory.
5. Attempt (at least some of) the Practice Questions that appear at the end of the module.
6. Think about what specifically you might want to include from that module in the reference
materials that you choose to have to hand during the exam. For example, you might want
to put together some easy-reference lists of key concepts or idea generation prompts that
can be referred to quickly and conveniently.
It’s a fact that people are more likely to absorb something if they review it several times. So, do
look over the modules you have studied so far from time to time. It is useful to re-read the
Module Summaries or to try the Practice Questions again a few days after reading the module
itself. It’s a good idea to annotate the questions with details of when you attempted each one. This
makes it easier to ensure that you try all of the questions as part of your revision without repeating
any that you got right first time.

Once you’ve read the relevant part of the notes and tried a selection of questions from the
Practice Questions (and attended a tutorial, if appropriate) you should attempt the corresponding
assignment. If you submit your assignment for marking, spend some time looking through it
carefully when it is returned. It can seem a bit depressing to analyse the errors you made, but
you will increase your chances of passing the exam by learning from your mistakes. The markers
will try their best to provide practical comments to help you to improve.
To be really prepared for the exam, you should not only be fully familiar with and understand the
Core Reading but also be aware of what the examiners will expect. Your revision programme should
include plenty of question practice so that you are aware of the typical style, content and marking
structure of exam questions. You should attempt as many past exam questions as you can.
Active study
Here are some techniques that may help you to study actively.
1. Don’t believe everything you read. Good candidates tend to question everything that
they read. They will ask ‘why, how, what for, when?’ when confronted with a new
concept, and they will apply their own judgement. This contrasts with those who
unquestioningly believe what they are told, learn it thoroughly, and reproduce it
(unquestioningly?) in response to exam questions.
2. Another useful technique as you read the Course Notes is to think of possible questions
that the examiners could ask. This will help you to understand the examiners’ point of
view and should mean that there are fewer nasty surprises in the exam. Use the Syllabus
to help you make up questions.
3. Annotate your notes with your own ideas and questions. This will make you study more
actively and will help when you come to review and revise the material. These notes may
also be useful to refer to in the exam. Do not simply copy out the notes without thinking
about the issues.
4. As you study each module, condense the key points (not whole chunks of text) on to a
double side of A4 or less. This is essential as otherwise, when you come to revision, you
will end up having to re-read the whole course again, and there won’t be time.
5. Try to use memory aids, such as mind maps and acronyms, to remind you of the material
when you come back to it later and help you to digest it further. Such aids may also be
useful to have in your reference materials.
6. Attempt the questions in the notes as you work through the course. Produce your answer
before you refer to the solution.

7. Attempt other questions and assignments on a similar basis, ie produce your answer
before looking at the solution provided. Attempting the assignments under exam
conditions has some particular benefits:
· It forces you to think and act in a way that is similar to how you will behave in the
exam.
· When you have your assignments marked it is much more useful if the marker’s
comments can show you how to improve your performance under timed
conditions than your performance when you are under no time pressure.
· The knowledge that you are going to do an assignment under timed conditions and
then submit it (however good or bad) for marking can act as a powerful incentive to
make you study each part as well as possible.
· It is also quicker than trying to produce perfect answers.
8. Sit a mock exam four to six weeks before the real exam to identify your weaknesses and
work to improve them. You could use a mock exam written by ActEd or a past exam
paper. Ensure that you have your reference materials handy, as you plan to in the actual
exam, so that you can practise finding what you need in them quickly and efficiently. (You
might even be able to add to / modify your reference materials to increase their
usefulness.)
You can find further information on how to study in the Institute and Faculty of Actuaries’
Qualification Handbook, which you can download from their website at:
Revision and exam skills

Revision skills
You will have sat many exams before and will have mastered the exam and revision techniques
that suit you. However it is important to note that due to the high volume of work involved in
Subject SP9, it is not possible to leave all your revision to the last minute. Candidates who
prepare well in advance have a better chance of passing the exam on the first sitting.
We recommend that you prepare for the exam by practising a large number of exam-style
questions under timed conditions. This will:
· help you to develop the necessary knowledge and understanding of the key principles
described in the Core Reading
· highlight exactly which are the key principles that crop up time and time again in many
different contexts and questions
· help you to practise the specific skills that you will need to pass the exam.
There are many sources of exam-style questions. You can use past exam papers, the Practice
Questions at the end of each module (which include many past exam questions), assignments,
mock exams, the Revision Notes and ASET.

Exam question skill levels
Exam questions are not designed to be of similar difficulty. The Institute and Faculty of Actuaries
specifies different skill levels at which questions may be set.
· Knowledge will be demonstrated through answering questions that assess understanding
· Application will be demonstrated through answering questions that assess the ability to
non-numerical).
· Higher order skills will be demonstrated through questions that will assess the ability to
Command verbs
‘Explain’) to help candidates to identify what the question requires. The examination can be
The Institute and Faculty of Actuaries also gives the following advice::
· The use of a specific command verb within a syllabus objective does not indicate that this
is the only form of question which can be asked on the topic covered by that objective.
· The examiners may ask a question on any syllabus topic using any of the agreed command
verbs, as are defined in the document.
Past exam papers

You can download past exam papers and Examiners’ Reports from the Institute and Faculty of
Actuaries’ website at:

The examination
The Institute and Faculty of Actuaries has produced an:
· Examinations Handbook, which contains practical assistance on how to sit an Institute and
Faculty of Actuaries’ examination, including guidance around notation and possible
standard keyboard notation that students could use when typing solutions in Word
· Assessment Regulations document, which includes rules on eligibility, entry and conduct
The Institute and Faculty of Actuaries advises students to ensure they read and have understood
the Assessment Regulations ahead of their exam(s).
The Examinations Handbook and Assessment Regulations document, along with additional
information about preparing for, booking and sitting the Institute and Faculty of Actuaries’ exams
can be found at:
IMPORTANT NOTE: These documents may be updated and published in the weeks leading up to
each exam session. It is important that you keep up-to-date with any changes and
developments.
For the exam, ensure you have ready:

· your reference materials, with helpful bookmarks
· rough paper and a pen / pencil
· a calculator / Excel (or equivalent)
· a printer (if you wish to print out the exam paper)
· a copy of the Tables.

2.5 Queries and feedback
Questions and queries

From time to time you may come across something in the study material that is unclear to you.
The easiest way to solve such problems is often through discussion with friends, colleagues and
peers – they will probably have had similar experiences whilst studying. If there’s no-one at work
to talk to then use our discussion forum at ActEd.co.uk/forums (or use the link from our home
page at ActEd.co.uk).
Our online forum is dedicated to actuarial candidates so that you can get help from fellow
candidates on any aspect of your studies from technical issues to study advice. You could also use
it to get ideas for revision or for further reading around the subject that you are studying. ActEd
tutors will visit the site regularly to ensure that you are not being led astray and we also post
other frequently asked questions from candidates on the forum as they arise.
If you are still stuck, then you can send queries by email to the relevant subject email address (see
Section 1.5), but we recommend that you try the forum first. We will endeavour to contact you as
soon as possible after receiving your query but you should be aware that it may take some time to
reply to queries, particularly when tutors are away from the office running tutorials. At the
busiest teaching times of year, it may take us more than a week to get back to you.
personal tuition session with an ActEd tutor. Information about personal tuition is set out in our
current brochure. Please email ActEd@bpp.com for more details.
Feedback
Otherwise please send details via email to the relevant subject email address (see Section 1.5).
Each year our tutors work hard to improve the quality of the study material and to ensure that
the courses are as clear as possible and free from errors. We are always happy to receive
feedback from candidates, particularly details concerning any errors, contradictions or unclear
statements in the courses. If you have any comments on this course, please email them to the
relevant subject email address (see Section 1.5).
Our tutors also work with the Institute and Faculty of Actuaries to suggest developments and

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CB2: Study Guide Page 1

Section 1 Introduction Page 1

Further information on study skills can be found on our website at ActEd.co.uk.

Before you start

The Actuarial Education Company © IFE: 2025 Examinations

2 Subject sequencing and contents

2.1 Links to other subjects

2.2 Subject contents

© IFE: 2025 Examinations The Actuarial Education Company

17 Classical and Keynesian theory 55

19 Monetarist and new classical schools, and

The Actuarial Education Company © IFE: 2025 Examinations

3.2 Topics and topic weightings

1.1 Relationship between economics and business (Module 1)

© IFE: 2025 Examinations The Actuarial Education Company

1.1.1 Principles of economic choice, including opportunity cost and scarcity

1.1.3 Features of and differences between microeconomics and macroeconomics

2. Microeconomics – the behaviour of consumers, firms and markets (40%)

2.1 How competitive markets operate (Modules 2 and 3)

2.1.2 Factors that influence market demand and supply

2.1.3 How market equilibrium quantity and price are achieved

2.1.4 How markets react to changes in demand and supply

2.1.6 Factors that affect elasticity

2.1.7 Effect of elasticity on the short- and long-term operation of markets

The Actuarial Education Company © IFE: 2025 Examinations

2.2 Consumer demand and behaviour (Module 4)

2.2.1 The concept of utility and the representation of consumer preferences as

2.3 The impact of advertising on sales and demand (Module 3)

2.4.2 Average and marginal physical product

2.4.4 Total, average and marginal costs

2.4.7 Calculation of average and marginal revenue

2.4.9 The ‘shut-down’ point in the short and long run

2.5 Profit maximisation under perfect competition and monopoly (Module 6)

2.5.1 What determines the market power of a firm

2.5.2 Main features of a market characterised by perfect competition, including how

© IFE: 2025 Examinations The Actuarial Education Company

2.6 Profit maximisation under imperfect competition (Module 7)

2.6.2 Main features of an oligopoly and the behaviour of firms in an oligopoly

2.6.4 Behaviour of oligopolists and the consumer interest

2.7.2 Average-cost pricing and price discrimination

3. Macroeconomics and the role of government (55%)

Understand aggregate economic variables and concepts which relates them to

3.1 Government intervention in a market (Module 9)

3.1.3 Why externalities can lead to inefficient markets

3.1.5 Role of taxation and regulation in correcting shortcomings in markets

3.1.7 Policy instruments that can be used to promote environmental sustainability

3.2.3 Government intervention to encourage technological advance and innovation

The Actuarial Education Company © IFE: 2025 Examinations

3.3 Globalisation and multinational business (Module 23)

3.3.1 Globalisation and its impact on business

3.3.2 The driving processes of globalisation and the benefits of globalisation

3.4 Importance of international trade (Module 12)

3.4.2 Advantages of specialisation

3.4.3 Arguments for trade restrictions and protection of domestic industries

3.4.4 Role of the World Trade Organization (WTO) in international trade

3.5.1 Main macroeconomic variables that governments seek to control

3.5.2 Impact of an economic stimulus on business output

3.5.3 Difference between actual and potential growth

3.5.9 Gross domestic product (GDP) and its measurement