One-year reserve risk including a tail factor: closed formula and bootstrap approaches
AbstractIn this paper, we detail the main simulation methods used in practice to measure one-year reserve risk, and describe the bootstrap method providing an empirical distribution of the Claims Development Result (CDR) whose variance is identical to the closed-form expression of the prediction error proposed by W\"uthrich et al. (2008). In particular, we integrate the stochastic modeling of a tail factor in the bootstrap procedure. We demonstrate the equivalence with existing analytical results and develop closed-form expressions for the error of prediction including a tail factor. A numerical example is given at the end of this study.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1107.0164.
Date of creation: Jul 2011
Date of revision: Apr 2012
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
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- England, Peter, 2002. "Addendum to "Analytic and bootstrap estimates of prediction errors in claims reserving"," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 461-466, December.
- England, Peter & Verrall, Richard, 1999. "Analytic and bootstrap estimates of prediction errors in claims reserving," Insurance: Mathematics and Economics, Elsevier, vol. 25(3), pages 281-293, December.
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