can anyone please clarify the assumption of using ODP bootstrap? I must’ve misunderstood the text Ch16 pg18 Incremental claims are positive for all development period Ch16 pg27 The ODP model is slightly more flexible because individual negative increments for any development period is possible, provided the development factor acrosss the development period as a whole is greater than one
Hi Yang Although one of the assumptions of the bootstrapping the ODP model is that incremental claims are positive for all development periods, the Core Reading on page 27 is saying that the method will still work if you have some individual negative developments, provided that the development factor across the whole development period is greater than one. The Core Reading on page 27 is actually comparing the bootstrapping the ODP model with log-normal models where you have to ignore negative development.
