nayizhenfeng

The correct answer is D

Poisson is not considered a “heavy” tailed distribution. The Poisson, Weibull, and Pareto distributions are all in the subexponential class. The natural logarithm of 1 is 0, since e0 = 1.

nayizhenfeng

AIM 3: Discuss the implications the closed-form operational VAR has on the general class of LDA models.

 

1、Operational losses are best approximated with:

A) exponential distributions.
 
B) skewed distributions.
 
C) heavy tailed distributions.
 
D) bimodal distributions.

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8、Which of the following statements are TRUE regarding the loss distribution approach (LDA)?

It is the most popular way to satisfy the AMA standards.
It is commonly used by insurance companies.
It requires an estimate of the probability distribution function.
It cannot be used if the frequency process is Poisson.
A) None of these.
 
B) I and II only.
 
C) II and IV only.
 
D) I and III only.
 

nayizhenfeng

The correct answer is B

An estimate of the PDF is not needed. Poisson is a common frequency process.

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AIM 2: Define various forms of subexponential severity distributions.

 

1、The sub exponential distribution:

A) is modeled with lots of small losses.
 
B) has tails that decay faster than the exponential distribution.
 
C) is similar to the normal distribution.
 
D) is heavy tailed in nature.

nayizhenfeng

The correct answer is D

A key feature of the sub exponential distribution is that its tails decay more slowly than the exponential distribution. Hence, the correct answer is that they are heavy tailed in nature.

nayizhenfeng

The correct answer is A

LDA is widely used in insurance and actuarial science.

nayizhenfeng

The correct answer is C

The severity process describes the magnitude, or size, of the loss.

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6、In the LDA process, the frequency process describes:

A) the number of losses that occur.
 
B) the distribution of the operational loss.
 
C) the size of the operational loss.
 
D) the term of the operational loss.

nayizhenfeng

The correct answer is A

The frequency describes the number of loss events that occur over a specific time interval.