In search of best fitted composite model to the ALAE data set with transformed Gamma and inversed transformed Gamma families

In this paper, a recent novel approach is applied to estimate the threshold parameter of a composite model. Several composite models from Transformed Gamma and Inverse Transformed Gamma families are constructed based on this approach and their parameters are estimated by the maximum likelihood metho...

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Bibliographic Details
Main Authors: Maghsoudi, Mastoureh, Bakar, Shaiful Anuar Abu
Format: Conference Proceeding
Language:English
Subjects:
Costs
Mathematical models
Maximum likelihood estimates
Maximum likelihood method
Parameter estimation
Online Access:Get full text
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Summary:In this paper, a recent novel approach is applied to estimate the threshold parameter of a composite model. Several composite models from Transformed Gamma and Inverse Transformed Gamma families are constructed based on this approach and their parameters are estimated by the maximum likelihood method. These composite models are fitted to allocated loss adjustment expenses (ALAE). In comparison to all composite models studied, the composite Weibull-Inverse Transformed Gamma model is proved to be a competitor candidate as it best fit the loss data. The final part considers the backtesting method to verify the validation of VaR and CTE risk measures.
ISSN:0094-243X
1551-7616
DOI:10.1063/1.4982837