The Concept of Credibility
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Introduction to Credibility. 10 min read, ~1,442 words.
Credibility formula:, where = credibility, = individual, = class. Full credibility ( ): data meets the standard, class gets zero weight. Partial credibility:, capped at 1. More data and lower variance both increase. Classical (limited fluctuation) can reach; Buhlmann never does for finite data.
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 4a
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