Estimation error and bootstrapping in the chain-ladder model of Mack
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Date
2021-06
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Journal Article
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Abstract
In 2006 there was quite some discussion on how to estimate theconditionalestimation error in the chain-ladder (CL) model of Mack. Buchwalder, Buhlmann, Merz and Wuthrich (BBMW) (ASTIN Bull 36(2):521-542, 2006) proposed another estimator than the one derived by Mack (ASTIN Bull 23(2):213-225, 1993). These two estimators are also found in a broader context by new authors in recent papers. In the present paper we examine the theoretical properties of the two estimators and come to the conclusion that the BBMW estimator has some major deficiencies compared with the Mack estimator. It takes much less information of the observed triangle into account, the averaging is done over inappropriate sets and it does not properly fit to the Mack CL-model.
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published
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Volume
11 (1)
Pages / Article No.
269 - 283
Publisher
Springer
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Subject
Claims reserving; Distribution free chain-ladder model; conditional mean square error of prediction; Mack’s formula; BBMW-formula
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02204 - RiskLab / RiskLab