A Economics B Psychology C Finance D Statistics E Financial Engineering

Statistics, such as the expected cost and timing of future events, can be obtained by studying and analyzing large amounts of data on car accidents (for example).  Insurance companies collect tons of data which actuaries can use to find trends that allow them to fairly accurately predict what will happen in the future.

But, the law of large numbers comes into play because an actuary cannot make accurate predictions for any one individual person or event.  They can only make accurate predictions if they have thousands of individuals or events.

They’ll be able to predict that, for example, 200 out of 5000 people will get in accident this month.  But they’ll have no idea about specifically which of those 500 people will be the ones to get in the accidents.

Thus , Acturial Science has borrowed its procedure from Statistics and Finance.

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