Cramér–Von Mises distance estimation for some positive infinitely divisible parametric families with actuarial applications. Issue 6 (2nd July 2016)

• Record Type: Journal Article
• Authors: Luong, Andrew
• Is Part Of: Scandinavian actuarial journal. Volume 2016:Issue 6(2016)
• Page Start: 530
• Page End: 549
• Publication Date: 2016-07-02
• Subjects: Lévy processes -- characteristic function -- chi-square test statistics -- goodness-of-fit tests -- stop loss premium -- present value of cash flows -- cumulants; Insurance, Life -- Mathematics -- Periodicals; Insurance -- Mathematics -- Periodicals; 368.01
• DOI: 10.1080/03461238.2014.977817
• Languages: English
• ISSNs: 0346-1238

Abstract

Abstract : Cramér–Von Mises (CVM) inference techniques are developed for some positive flexible infinitely divisible parametric families generalizing the compound Poisson family. These larger families appear to be useful for parametric inference for positive data. The methods are based on inverting the characteristic functions. They are numerically implementable whenever the characteristic function has a closed form. In general, likelihood methods based on density functions are more difficult to implement. CVM methods also lead to model testing, with test statistics asymptotically following a chi-square distribution. The methods are for continuous models, but they can also handle models with a discontinuity point at the origin such as the case of compound Poisson models. Simulation studies seem to suggest that CVM estimators are more efficient than moment estimators for the common range of the compound Poisson gamma family. Actuarial applications include estimation of the stop loss premium, and estimation of the present value of cash flows when interest rates are assumed to be driven by a corresponding Lévy process.