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Local Transformation Kernel Density Estimation of Loss Distributions

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Author Info
J. Gustafsson (Codan Insurance and University of Copenhagen, Copenhagen, Denmark)
M. Hagmann (University of Geneva and Concordia Advisors, London, United Kingdom)
J.P. Nielsen (Festina Lente and University of Copenhagen, Copenhagen, Denmark)
O. Scaillet (University of Geneva and Swiss Finance Institute)

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Abstract

We develop a tailor made semiparametric asymmetric kernel density estimator for the estimation of actuarial loss distributions. The estimator is obtained by transforming the data with the generalized Champernowne distribution initially fitted to the data. Then the density of the transformed data is estimated by use of local asymmetric kernel methods to obtain superior estimation properties in the tails. We find in a vast simulation study that the proposed semiparametric estimation procedure performs well relative to alternative estimators. An application to operational loss data illustrates the proposed method.

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File URL: http://ssrn.com/abstract=994294
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Publisher Info
Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 06-32.

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Length: 32 pages
Date of creation: Nov 2006
Date of revision: Jun 2007
Handle: RePEc:chf:rpseri:rp0632

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Web page: http://www.SwissFinanceInstitute.ch
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Related research
Keywords: Actuarial loss models; Transformation; Champernowne distribution; asymmetric kernels; local likelihood estimation;

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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This page was last updated on 2009-11-30.


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