# Barnett & Zehnwirth

 The flashcards below were created by user Esaie on FreezingBlue Flashcards. Extended link ratio family Assumes heteroscedastic normalityStandard link ratio model carry assumptions not usually satisfied by dataE(y|x) = bxDiagnostic test - wtd stadardized residuals vs fitted value should appear rdmDownward trend indicated that large values are overpredicted and small values are underpredicted Statistical modeling framework Possibility of parameters in:Acc yr - determines level from yr to yrDvpmt yr - orthogonal to acc yrPmt yr - trend from pay yr to pay yr median = exp(α + Σγk)mean = median * exp(0.5σ²) Statistical Modeling: Assumptions about future If pmt / CY trend has been stable in the more recent yrs, assumptin relatively straightforwardIf unstable, assumptions about future will depend on explanation for the instability Statistical Modeling: prediction intervals In an insr writes more than one long-tail line and aims for a 100(1 - α)% security level on all the lines combined, then the risk margin per line decreases the more lines the company writes.Let se = standard error and rm = risk margin:se(Total) = √[se²(1) + ... + se²(n)]if rm(all lines) = k*se(Total) thenrm(j) = k*se(j)/Σse(i) < k*se(j) AuthorEsaie ID33878 Card SetBarnett & Zehnwirth DescriptionExam6 by Esaie Barnett & Zehmwirth Updated2010-09-10T22:00:04Z Show Answers