What is economic freedom.
(5 points) You are given the following triangle of cumulative paid losses: Months of Development Accident Year 12 24 36 2013 4,000 6.500 7.250 2014 5,000 8,000 2015 6,000 You are using Clark's LDF method and an exponential distribution with cumulative distribution function G(x)=1-e #. (a) (1.5 points) State two advantages and one disadvantage of using a parametric cumulative distribution function to model loss development. The maximum likelihood estimate of O is 7.804. The fitted triangle of cumulative paid losses is: Months of Development Accident Year 12 24 36 2013 Y 7.250 2014 4,766 8,000 2015 6,000 (b) (I point) Calculate the maximum likelihood estimate of accident year 2013 ultimate losses, ULT213- (/ point) Calculate the values of X and Y. (d) (0.5 points) Identify the number of degrees of freedom associated with the estimate of o'. The estimate of o' is 47. (e) (/ point) Estimate the process standard deviation of the accident year 2013 reserve.(6 points) You are interested in determining the variability of unpaid claim estimates. The triangle of paid claims data you are working with, by accident year (AY) and development year, is presented below. The shaded cells have been completed using the standard chain ladder method. It is assumed that all claims are fully developed after seven years. Mack's method of estimating reserve variability has been applied to this triangle. The key results are provided in the table. Development Year AY 2 3 4 5 6 7 Standard error 1 9.791 12,431 13,033 14,212 14.486 14,867 15,155 11.314 19.266 23,518 27,910 28.117 28,697 29,253 15 3 12,654 14,924 18,489 22,433 24.281 24.829 25.310 111 13,305 14,234 15,293 15,900 16.474 16,845 17,172 903 14.693 26,298 37,108 42,448 43.980 44,972 45,843 3,208 6 16.037 18,544 22,861 26,151 27.094 27,705 28,242 4,399 7 17,360 23,587 29.077 33,262 34.462 35,239 35.922 9,393 1.35868 1.23279 1.14392 1.03608 1.02256 1.01937 1.264.53 404.682 111.855 37.514 0.308 0.00252 (a) (1.5 points) Demonstrate that the value of of was correctly calculated. (Your calculation need not match to all three decimal places.) (b) (1.5 points) Demonstrate that the standard error for accident year 3 was correctly calculated. For a given accident year, it is possible that the value for a given development year will be less than the value for the previous development year. (c) (1.5 points) For each of Mack's three assumptions: (1) State the assumption; and (ii) Explain why that assumption does or does not prevent the value from decreasing from one development year to the next
