Identifying Appropriate Frequency Distributions
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Severity, Frequency, and Aggregate Models. 8 min read, ~1,157 words.
Variance-to-mean = 1: Poisson. < 1: Binomial. 1: Negative binomial. Overdispersion is common: heterogeneous populations inflate variance beyond Poisson. Both heterogeneity and contagion produce overdispersion. The ratio cannot distinguish them. Zero-inflation: excess zeros need a zero-modified or zero-inflated (a,b,1) model. Truncated data distorts the ratio: ZT Poisson shows an apparent...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
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- Exam Shortcuts
Learning objectives
- 2h
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