Normal and Lognormal Approximations for Aggregate Distributions
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Severity, Frequency, and Aggregate Models. 11 min read, ~1,700 words.
Normal:. Fast, works when is large. Lognormal: match moments, solve,. Standardize, not. Lognormal captures right skewness. Normal is symmetric (assigns probability to ). Both need same inputs: and from LO 2i. Solve first: it does not depend on. Follow the problem's instruction on which approximation to use.
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 2j
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