What is a swing rate?
Freihaut mentions a swing rate on page 8 and 9 but doesn't define it and I haven't come across this term on any other readings or on exam 5. What is a swing rate? I am unsure what he means by "The profit provision swings on a one-to-one basis with the loss ratio."
Comments
Swing rate explains the direct proportional relationship between two items. Here, profit provision decreases by one point for each one point increase in loss ratio. The relationship does not always have to be 1-to-1.