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Article: Modeling insurance claims via a mixture exponential model combined with peaks-over-threshold approach

TitleModeling insurance claims via a mixture exponential model combined with peaks-over-threshold approach
Authors
KeywordsExtreme Value Theory
Insurance Claims Modeling
Mixture Component Testing
Mixture Exponential Distribution
Threshold Model
Issue Date2012
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime
Citation
Insurance: Mathematics And Economics, 2012, v. 51 n. 3, p. 538-550 How to Cite?
AbstractWe consider a model which allows data-driven threshold selection in extreme value analysis. A mixture exponential distribution is employed as the thin-tailed distribution in view of the special structure of insurance claims, where individuals are often grouped into categories. An EM algorithm-based procedure is described in model fitting. We then demonstrate how a multi-level fitting procedure will substantially reduce computation time when the data set is large. The fitted model is applied to derive statistics such as return level and expected tail loss of the claim distribution, and ruin probability bounds are obtained. Finally we propose a statistical test to justify the choice of mixture exponential distribution over the homogeneous exponential distribution in terms of improved fit. © 2012 Elsevier B.V.
Persistent Identifierhttp://hdl.handle.net/10722/172508
ISSN
2015 Impact Factor: 1.378
2015 SCImago Journal Rankings: 1.000
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorLee, Den_US
dc.contributor.authorLi, WKen_US
dc.contributor.authorWong, TSTen_US
dc.date.accessioned2012-10-30T06:22:51Z-
dc.date.available2012-10-30T06:22:51Z-
dc.date.issued2012en_US
dc.identifier.citationInsurance: Mathematics And Economics, 2012, v. 51 n. 3, p. 538-550en_US
dc.identifier.issn0167-6687en_US
dc.identifier.urihttp://hdl.handle.net/10722/172508-
dc.description.abstractWe consider a model which allows data-driven threshold selection in extreme value analysis. A mixture exponential distribution is employed as the thin-tailed distribution in view of the special structure of insurance claims, where individuals are often grouped into categories. An EM algorithm-based procedure is described in model fitting. We then demonstrate how a multi-level fitting procedure will substantially reduce computation time when the data set is large. The fitted model is applied to derive statistics such as return level and expected tail loss of the claim distribution, and ruin probability bounds are obtained. Finally we propose a statistical test to justify the choice of mixture exponential distribution over the homogeneous exponential distribution in terms of improved fit. © 2012 Elsevier B.V.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/imeen_US
dc.relation.ispartofInsurance: Mathematics and Economicsen_US
dc.subjectExtreme Value Theoryen_US
dc.subjectInsurance Claims Modelingen_US
dc.subjectMixture Component Testingen_US
dc.subjectMixture Exponential Distributionen_US
dc.subjectThreshold Modelen_US
dc.titleModeling insurance claims via a mixture exponential model combined with peaks-over-threshold approachen_US
dc.typeArticleen_US
dc.identifier.emailLi, WK: hrntlwk@hku.hken_US
dc.identifier.authorityLi, WK=rp00741en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1016/j.insmatheco.2012.07.008en_US
dc.identifier.scopuseid_2-s2.0-84865057731en_US
dc.identifier.hkuros225266-
dc.identifier.volume51en_US
dc.identifier.issue3en_US
dc.identifier.spage538en_US
dc.identifier.epage550en_US
dc.identifier.isiWOS:000312176500004-
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridLee, D=55337511400en_US
dc.identifier.scopusauthoridLi, WK=14015971200en_US
dc.identifier.scopusauthoridWong, TST=36626723000en_US
dc.identifier.citeulike11755444-

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