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THE CHAIN LADDER TECHNIQUE — A STOCHASTIC MODELModel (2.2) is essentially a regression model whe. e the design matrix involves indicator variables. How. ver, the design based on (2.2) alone is singular. In view of constraint (2,3), the actual number of free parame. ers is 2s-1, yet model (2.2) has 2s+l parameters. By setting a1=b1=0, say, the ...
- 395KB
- 9
Dec 20, 2002 · The chain–ladder method is the most popular method of loss reserving. In its origin, it is nothing else than a heuristic and appealing algorithm. Because of the stochastic nature of the quantities to which the algorithm is applied, several authors have studied the question whether the chain–ladder method can be justified by a stochastic model and a statistical method related to the model.
- Klaus Th. Hess, Klaus D. Schmidt
- 2002
Dec 1, 1994 · We have also shown that model (5) is a stochastic model underlying the chain ladder method. Moreover, model (5) has only n - 1 parameters - as opposed to 2n - 1 (or even 2n) in case of model (4c) - and is therefore more robust than model (4c). Finally, one might argue that one advantage of the loglinear model (4c) is the fact that it allows to ...
- Thomas Mack
- 1994
Stochastic models underlying the CL algorithm B CLalgorithmisnotbased on a stochastic model (deterministic algorithm). B We need astochastic representationto quantify prediction uncertainty. B Stochastic models introduced providing the CL reserves:?Mack’s distribution-free CL model (1993)
Flexible Factor Chain Ladder Model: A Stochastic Framework for Reasonable Link Ratio Selections. Emanuel Bardis, FCAS, MAAA; Ali Majidi; and Daniel Murphy, FCAS, MAAA. Abstract: The popular General/Property-Casualty Insurance chain ladder method was first expanded to include variance calculations by Mack [1].
Oct 28, 2016 · In this article we present three sequential models in which assumptions are made on the first and second conditional moments of the cumulative losses, given the cumulative losses of older development years, and which justify the chain ladder method to a certain extent with regard to unbiasedness or optimality of the chain ladder predictors.
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The Chain Ladder Method Basic Notation C i;j >0is the cumulative paid or incurred loss from accident period i at development step j 2f0;:::;Jg. The known part of these form a loss development triangle. Ultimatesat j = J. Link ratios f i;j = C i;j=C i;j 1. Chain Ladder Principle: predict future values by C^ i;j:= ˆ C i;jif known, f ^ j C i ;j 1 ...
