Scale and Shape Parameters in Continuous Models
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Severity, Frequency, and Aggregate Models. 8 min read, ~1,228 words.
Scale parameter stretches the distribution without changing its shape., CV unchanged. Shape parameter changes tail weight, skewness, hazard rate. CV depends only on shape. Inflation is a scale change: adjust only the scale parameter. Shape stays fixed. Lognormal exception: is scale (additive on log scale), is shape. Leverage effect: with...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 2b
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