A maximum-entropy approach to the linear credibility formula
Payandeh [Payandeh Najafabadi, A.T., 2010. A new approach to credibility formula. Insurance: Mathematics and Economy 46, 334–338] introduced a new technique to approximate a Bayes’ estimator with the exact credibility’s form. This article employs a well known and powerful maximum-entropy method (MEM) to extend results of Payandeh Najafabadi (2010) to a class of linear credibility, whenever claim sizes have been distributed according to the logconcave distributions. Namely, (i) it employs the maximum-entropy method to approximate an appropriate Bayes’ estimator (with respect to either the square-error or the Linex loss functions and general increasing and bounded prior distribution) by a linear combination of claim sizes; (ii) it establishes that such an approximation coincides with the exact credibility formula whenever the require conditions for the exact credibility (see below) are held. Some properties of such an approximation are discussed. Application to crop insurance has been given.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer, vol. 26(2), pages 445-469, 08.
- Payandeh Najafabadi, Amir T., 2010.
"A new approach to the credibility formula,"
21587, University Library of Munich, Germany, revised 0020.
- Amir H. Darooneh, 2004. "Non-Life Insurance Pricing: Multi Agents Model," Papers cond-mat/0402239, arXiv.org.
- Boucher, Jean-Philippe & Denuit, Michel, 2008. "Credibility premiums for the zero-inflated Poisson model and new hunger for bonus interpretation," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 727-735, April.
- Roderick M. Rejesus & Keith H. Coble & Thomas O. Knight & Yufei Jin, 2006. "Developing Experience-Based Premium Rate Discounts in Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 409-419.
- Landsman, Zinoviy, 2002. "Credibility theory: a new view from the theory of second order optimal statistics," Insurance: Mathematics and Economics, Elsevier, vol. 30(3), pages 351-362, June.
- Landsman, Zinoviy & Makov, Udi E., 1999. "Credibility evaluation for the exponential dispersion family," Insurance: Mathematics and Economics, Elsevier, vol. 24(1-2), pages 23-29, March.
When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:51:y:2012:i:1:p:216-221. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.