Venter

Question 1

Six testable implications of Mack

Answer 1

1) Significance of f (twice its SD)
2) Superiority to alternatives (AIC, BIC, SSE)
3) Linearity
4) Stability
5) Correlation of LDFs
6) Additive CY effects

Question 2

Three alternatives to standard CL pattern

Answer 2

1) Linear with constant
2) Factor times parameter
3) Factor times parameter including CY effect

Question 3

Why additive CL and CC will always produce same results

Answer 3

CC = f(d)*h; h does not vary by year, so it is equivalent to additive CL which states next period expected loss is g(d); can define g(d) = f(d)h

Question 4

Three methods for reducing # of parameters in BF

Answer 4

Assume several AYs have same mean level
Fit a trend line through ultimate loss parameters
Group AY’s using apparent jumps in loss levels and fit single h