On Oct 8, 2009, at 1:13 PM, Albyn Jones wrote:
Quoting David Winsemius <dwinsem...@comcast.net>:
In insurance situation there is typically a cap on the covered
losses and there is also typically an amount below which it would
not make sense to offer a policy. So a minimum and a maximum are
sensible assumptions about loss distributions in may real modeling
situations.
--
David.
is that cap the same for every policy, or are there different types
of policies with different bounds?
A variation in policy coverage maximums is typical for casualty and
life insurance, and the contingencies are of different types
(variable, fixed). There is often a cap at $US 10^6 on US health
insurance coverage (also variable). The actuarial problem for casualty
coverage distributions is handled with some sort of convolution
operation. (ObIANAA.)
If there are caps, then other probability models mentioned like the
Weibull don't seem reasonable, unless they are truncated
distribution models.
Agreed. Hopefully that issue will be exposed in the process of
comparing the fit of the distributions having appropriate structure to
the problem to those having an inappropriate structure. I would also
wonder how one can fairly compare across distribution types with
varying numbers of parameters?
albyn
David Winsemius, MD
Heritage Laboratories
West Hartford, CT
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