Hi does anyone know the fomula or where I can find the fomula for 5 parameter pareto? I googled so long and could not find any paper about it. I thought it was well-used distribution for liability severety? Thanks a lot for letting me know.
Hi Xi, just saw your post. It stood here for long and I would try answering it. The 5-parameter pareto distribution is used by the US ISO to curve fit the ILF for the liability lines. It is also called Mixed Pareto distribution. It is in essence a weighted-average of 2-paremeter pareto distribution, F(x;a,b)=1-(a/x+b)^a. The form of the weighted-average is F(x)=w*F(x;a1,b1)+(1-w)*F(x;a2,b2). So you can see the five parameters are a1,b1,a2,b2 and the weight w.
