4. Frequency-Severity Analysis Flashcards
1
Q
Name 3 options of ditribution to modelize frequency
A
- Poisson
- Binomial
- Negative Binomial
2
Q
How can you select a frequency distribution?
A
- Compare the variance with the mean
- Assess goodness of fit with chi-square test
3
Q
Name 5 options of ditribution to modelize severity
A
- Exponential
- Gamma
- Weibull
- Lognormal
- Pareto
4
Q
What is a downside of using a normal approximation for the sums of random variables?
A
It will generally underestimate the probability of large losses.
5
Q
Other than the normal approximation, name 3 methods to approximate the sum of random variables.
A
- Translated gamma distribution
- Panjer Recursion
- Fast Fourier Transforms
6
Q
What are limits of the Aggregate Loss Distribution (Total losses is S, frequency is N and individual severity is Y)
A
- Independence of severity and frequency will not hold true in most circumstances
- Very rare and very severe events are rarely well modeled with statistical techniques and that is what we are interested in.
