
Last chance! 50% off unlimited learning
Sale ends in
One of the main assumptions underlying the chain ladder method is the uncorrelation of subsequest development factor. The function tests this assumption.
dfCorTest(Triangle, ci = .5)
dfCorTest returns a list with the following elements
summary statistic
variance of the resulting distribution
vector of the range corresponding the confidence interval threshold selected
confidence interval
cumulative claims triangle. Assume columns are the development
period, use transpose otherwise.
A (mxn)-matrix qpaid
for how to use (mxn)-development triangles with
m<n, say higher development period frequency (e.g quarterly) than
origin period frequency (e.g accident years).
confidence interval. Default: .5. A confidence interval is a type of interval estimate, computed from the statis tics of the observed data, that might contain the true value of an unknown population parameter. The interval has an associated confidence level that quantifies the level of confidence that the parameter lies in the interval.
Marco De Virgilis devirgilis.marco@gmail.com
As described by the Mack's 1994 paper a procedure is designed to test for calendar year influences.
The usual test for uncorrelatedness requires that we have identically distributed pairs of observations which come from a Normal distribution. Both conditions are usually not fulfilled for adjacent columns of development factors. Spearman's correlation coefficient is therefore used.
The metric calulated by the procudeure described return a statistic
Mack, T., Measuring the Variability of Chain Ladder Reserve Estimates, Casualty Actuarial Society Forum, Spring 1994
See also qpaid
for dealing with non-square triangles,
cyEffTest
for the test for calendar year effect,
chainladder
for the chain-ladder method,
summary.dfCorTest
,
plot.dfCorTest
# Before actually applying the Chain Ladder technique it is necessary to check
# whether the Development Factors are correlated
# Apply the function to the triangle and save the output into the variable test
test <- dfCorTest(RAA)
# Plot the confidence interval and the test metric
plot(test)
# The metric is within the confidence interval, therefore the Development Factors are nor correlated
# Print the summary table
summary(test)
# Print only the main outcomes
print(test)
# The test has returned a negative outcome. This means that the triangle is
# not affected by Development Factor Correlation and therefore the chain ladder method
# can be applied.
Run the code above in your browser using DataLab