Validation by Educational Experience (VEE)

• Introduction
• How to Get VEE Credit
• VEE-Applied Statistical Methods
• VEE-Corporate Finance
• VEE-Economics

The CAS, CIA, and SOA Validation by Educational Experience (VEE) topics consist of the following subjects:

• Economics
• Corporate Finance
• Applied Statistical Methods.

These topics are not tested on the preliminary exams, but are required in addition to the preliminary exams. NOTE: VEE topics are not prerequisites for the preliminary examinations. They need not be completed prior to writing any of the preliminary exams and may be fulfilled independently of the preliminary exam process.

In addition to the preliminary education requirements listed above, each society has additional educational requirements for membership. Please visit the Web sites of the three societies for additional information. Details about the process for obtaining credit for the VEE topics are provided below. VEE topics are not prerequisites for the preliminary examinations and may be fulfilled independently of the preliminary exam process.

How to Get VEE Credit

• College Course(s) Complete the required VEE approved courses offered by a college or university. Candidates must receive a grade of B– or better in each course unless otherwise noted. Directory of Approved Courses/Experiences
• Standardized Examinations and Other Educational Experiences Achieve the required grade on an approved standardized examination or other educational experience. Standardized Examinations and Other Educational Experiences List

For more information visit the Approved Courses/Experiences for VEE Web page.

Step 1: Approval of Courses/Experiences

The VEE Administration Committee determines which college courses, standardized exams, and other educational experiences are approved for VEE credit. All approved courses/experiences will be listed in the Directory of Approved VEE Courses/Experiences or the Standardized Exams and Other Educational Experiences list available on the CAS, CIA, and SOA Web Sites. Each list identifies the educational institution, the approved courses/experiences by VEE topic, a unique approval code for each course/experience, and the years for which the courses/experiences were approved.

Before a candidate may submit an application to receive individual credit for a VEE topic, the course or educational experience itself must first be approved and listed in the Directory of Approved Courses/Experiences or the Standardized Exams and Other Educational Experiences list. Both lists are found on the Approved Courses/Experiences for VEE Web page.

If a VEE Course/Experience does not appear on either list, approval must be requested by completing a VEE Course Approval Application and submitting it along with the required documentation. The guidelines that the VEE Administration Committee will use to determine whether specific courses or educational experiences are appropriate to fulfill the VEE requirements are provided below Step 2.

Step 2: Approval of Individual VEE Credits for Candidates

Candidates who have credit for at least two actuarial examinations with the SOA or CAS may submit a VEE Candidate Credit Application. In addition to the application, candidates will be required to arrange for an official transcript to be submitted to the VEE Administrator. Only approved courses/experiences listed in the Directory of Approved Courses or the Standardized Exams and Other Educational Experiences list may be used for VEE credit.

Candidates may combine two approved courses/experiences to complete a VEE topic requirement. For example, an approved microeconomics course from a university may be combined with an approved macroeconomics course from another school or provider. Likewise, an approved regression course may be combined with an approved time series course from two different providers. In these cases candidates should include approval codes from both approved courses on their individual VEE credit application form. Corporate finance courses, however, must be completed in the combinations shown in the directory. No alternate combinations will be accepted without an additional course approval application process.

Note: Candidates may not submit VEE credit applications for partial credit (e.g., an approved regression course may not be submitted alone, but must be accompanied on the same application by an approved time series course). Candidates may not submit an application for VEE credit for a topic until they have completed all requirements for that topic.

Specific questions may be sent to vee@soa.org.

Once a candidate's individual credit application and documentation of the required grade on an approved course/experience has been validated, credit for the specific VEE topic will be granted. The candidate will be sent a written response to each application.

(For candidates with credit for Exam/Course 2 and/or 4 earned prior to 2005, transcripts will show credit for Exam/Course 2 and/or 4 only. The VEE credit earned as part of these courses is included in the Exam/Course 2 and/or 4 credit. It will not appear as a separate VEE credit.)

VEE-Applied Statistical Methods

Courses that meet the requirement for VEE-Applied Statistical Methods may be taught in the mathematics, statistics, or economics department, or in the business school. In economics departments, this course may be called Econometrics. The material could be covered by one course or two. The level of mathematical sophistication of these courses will vary widely and all levels are intended to be acceptable. Most of the topics listed below should be covered:

Regression analysis

1. Least square estimates of parameters
2. Single linear regression
3. Multiple linear regression
4. Hypothesis testing and confidence intervals in linear regression models
5. Testing of models, data analysis, and appropriateness of models

1. Linear time series models
2. Moving average, autoregressive, and/or ARIMA models
3. Estimation, data analysis, and forecasting with time series models
4. Forecast errors and confidence intervals

The typical corporate finance sequence in a business school consists of an introductory semester followed by an advanced semester. The advanced semester will more likely be the one that aligns with the learning objectives.

The standard validation method will be completion of the second semester of a two-semester corporate finance sequence. Generally, only the second semester course grade will be evaluated unless this is a narrow course in which case both the first and second semester course grades will be evaluated. The exceptional case where the corporate finance material is covered in one course only will also be considered.

Most of the topics in each category listed below should be covered:

Finance

• Definitions of key finance terms: stock company; capital structure
• Key finance concepts: financing companies; characteristics and uses of financial instruments; sources of capital; cost of capital; dividend policy; personal and corporate taxation
• Factors to be considered by a company when deciding on its capital structure and dividend policy
• Impact of financial leverage and long/short term financing policies on capital structure
• Characteristics of the principal forms of financial instruments issued or used by companies, and the ways in which they may be issued
• How a company's cost of capital relates to the investment projects the company wishes to undertake

Investment

• Key finance concepts: option pricing theory and stock valuation
• Definitions of key finance terms: financial instruments - bond, stock, basic options (calls, puts); dividends; price to earnings ratio
• Structure of a stock company and the different methods by which it may be financed
• Calculate value of stocks
• Calculate value of options
• Measures of financial performance: balance sheet; income statement; statement of cash flows; financial ratios (e.g. leverage, liquidity, profitability, market value ratios); net present value: the payback, discounted payback models; internal rate of return and profitability index models
• Assessment of financial performance using various measures: balance sheet; income statement; statement of cash flows, financial ratios (e.g. leverage, liquidity, profitability, market value ratios); net present value; the payback, discounted payback models; internal rate of return and profitability index models

Typically, the VEE requirement for Economics will be met if a candidate has completed two introductory economics courses, one course covering microeconomics and the other covering macroeconomics. Most of the topics listed below should be covered:

Microeconomics

1. Interaction between supply and demand in the provision of a product and the way in which equilibrium market prices are determined
2. Elasticity of demand and supply and the effects on a market of different levels of elasticity
3. How rational utility maximizing agents make consumption choices
4. How profit-maximizing firms make short-run and long-run production choices
5. Different types of competition, or lack of it, and the practical effect on supply and demand

Macroeconomics

1. Structure of public sector finances of an industrialized economy
2. GDP, GNP, and Net National Product: How these concepts are used in describing the economy and in making comparisons between countries, and the limitations of these concepts
3. Propensity to save or to consume by the private sector or the corporate sector and how it affects the economy
4. Impact of fiscal and monetary policy and other forms of government intervention on different aspects of the economy, and in particular on financial markets
5. Role of exchange rates and international trade in the economy and the meaning of the term balance of payments
6. Major factors affecting the rate of inflation, the level of interest rates, the exchange rate, the level of unemployment, and the rate of economic growth in the economy of an industrialized country