Do the following: Calibrate (i.e. find the parameters of) the Lognormal distribution based on these losses,
Question:
Do the following:
• Calibrate (i.e. find the parameters of) the Lognormal distribution based on these losses, pretending you do not know what the original parameters were.
• Calculate the mean, the standard deviation and the percentiles 50%, 75%, 80%, 90%, 95%, 98%, 99%, and 99.5% of the severity distribution using the parameters calculated in
(a) and compare these statistics with the same statistics calculated for the original Lognormal distribution (μ = 10, σ = 1). What is the percentage difference?
• Calculate the KS distance between the Lognormal distribution with the parameters calculated as in
(a) and the data points.
• Compare the KS distance between the original Lognormal distribution and the data points.
• Compare the KS distance as calculated in
(c) and (d). Which one is the largest, and why?
Step by Step Answer:
