Chain-Ladder as Maximum Likelihood Revisited

D. Kuang (), B. Nielsen () and J. P. Nielsen ()
Additional contact information
D. Kuang: Aon, 8 Devonshire Square, London
B. Nielsen: Nuffield College, Oxford.
J. P. Nielsen: Cass Business School, City University London.
Authors registered in the RePEc Author Service: Bent Nielsen

No 2009-W08, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: It has long been known that maximum likelihood estimation in a Poisson model reproduces the chain-ladder technique. We revisit this model. A new canonical parametrisation is proposed to circumvent the inherent identification problem in the parametrisation. The maximum likelihood estimators for the canonical parameter are simple, interpretable and easy to derive. The boundary problem where all observations in one particular development year or on particular underwriting year is zero is also analysed.

Keywords: Boundary problem; canonical parameter; chain-ladder; identification problem; maximum likelihood; Poisson model (search for similar items in EconPapers)
Pages: 18 pages
Date: 2009-08-21
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:nuf:econwp:0908

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