Derive the discretized version of a continuous distribution using the method of rounding and local moment matching.
Free SOA Exam ASTAM (Advanced Short-Term Actuarial Mathematics) lesson in Aggregate Models. 17 min read, ~2,480 words.
Method of rounding (mass dispersal): and. Total probability preserved. Local moment matching with moments: each interval of length gets masses so the first moments of match. Most common variant matches 0th and 1st moments ( ), preserving probability and mean exactly. Rounding biases the mean, while local moment matching at...
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- Example 2
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Learning objectives
- 2b
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