Estimate the parameters for frequency and severity distributions by maximum likelihood.
Free SOA Exam ASTAM (Advanced Short-Term Actuarial Mathematics) lesson in Construction and Selection of Parametric Models. 31 min read, ~4,713 words.
Likelihood is the product of over complete observations, over right-censored ones, and over left-truncated ones. Closed form: Poisson; exponential; lognormal and with divisor, not. Numerical only: gamma, Weibull, Pareto (both parameters), negative binomial. Newton-Raphson on the score. Invariance: MLE of is. Apply directly to survival probabilities, VaR, layer means. Asymptotic...
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- Content
- Example 1
- Example 2
- Example 3
- Example 4
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Learning objectives
- 4a
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