Bayesian credibility premium with GB2 copulas

Jeong Himchan () and Valdez Emiliano A. ()
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Jeong Himchan: Department of Statistics and Actuarial Science, Simon Fraser University
Valdez Emiliano A.: Department of Mathematics, University of Connecticut

Dependence Modeling, 2020, vol. 8, issue 1, 157-171

Abstract: For observations over a period of time, Bayesian credibility premium may be used to predict the value of a response variable for a subject, given previously observed values. In this article, we formulate Bayesian credibility premium under a change of probability measure within the copula framework. Such reformulation is demonstrated using the multivariate generalized beta of the second kind (GB2) distribution. Within this family of GB2 copulas, we are able to derive explicit form of Bayesian credibility premium. Numerical illustrations show the application of these estimators in determining experience-rated insurance premium. We consider generalized Pareto as a special case.

Keywords: hierarchical models; Bayesian posterior; insurance credibility; generalized beta of the second kind (GB2) and its copula; generalized Pareto (GP); 62E15; 62F15; 62P05 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:demode:v:8:y:2020:i:1:p:157-171:n:22

DOI: 10.1515/demo-2020-0009

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