Credibility theory based on trimming

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

The classical credibility theory proposed by Bühlmann has been widely used in general insurance applications. In this paper we propose a credibility theory via truncation of the loss data, or the trimmed mean. The proposed framework contains the classical credibility theory as a special case and is based on the idea of varying the trimming threshold level to investigate the sensitivity of the credibility premium. After showing that the trimmed mean is not a coherent risk measure, we investigate some related asymptotic properties of the structural parameters in credibility. Later a numerical illustration shows that the proposed credibility models can successfully capture the tail risk of the underlying loss model, thus providing a better landscape of the overall risk that insurers assume.

Original languageEnglish
Pages (from-to)36-47
Number of pages12
JournalInsurance: Mathematics and Economics
Volume53
Issue number1
DOIs
Publication statusPublished - 2013 Jul 1

Fingerprint

Credibility Theory
Trimming
Credibility
Trimmed Mean
Coherent Risk Measures
Structural Parameters
Insurance
Truncation
Asymptotic Properties
Tail
Model
Credibility theory

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Cite this

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Credibility theory based on trimming. / Kim, Joseph H.T.; Jeon, Yongho.

In: Insurance: Mathematics and Economics, Vol. 53, No. 1, 01.07.2013, p. 36-47.

Research output: Contribution to journalArticle

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