Estimation of the parameters of a Markov-modulated loss process in insurance

Armelle Guillou, Stéphane Loisel and Gilles Stupfler

Insurance: Mathematics and Economics, 2013, vol. 53, issue 2, 388-404

Abstract: We present a new model of loss processes in insurance. The process is a couple (N,L) where N is a univariate Markov-modulated Poisson process (MMPP) and L is a multivariate loss process whose behavior is driven by N. We prove the strong consistency of the maximum likelihood estimator of the parameters of this model and present an EM algorithm to compute it in practice. The method is illustrated with simulations and real sets of insurance data.

Keywords: Markov-modulated Poisson process; Maximum likelihood estimator; Strong consistency; EM algorithm (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:53:y:2013:i:2:p:388-404

DOI: 10.1016/j.insmatheco.2013.07.003

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