• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Q&A Bank3, Q3.12

A

ALEX_AK

Member
Hi,

I understand that Type2 Negative Binomial gives X as the number of failure before the kth success. How can this distribution be used to model no. of claims? From the solution, k is given as 1.8569. What is the relationship between k and the number of claims in a policy?
 
ALEX_AK said:
Hi,

I understand that Type2 Negative Binomial gives X as the number of failure before the kth success. How can this distribution be used to model no. of claims? From the solution, k is given as 1.8569. What is the relationship between k and the number of claims in a policy?
Click to expand...

That's how we can construct the formula from a real life situation for integer k.

However, the distribution can be generalised beyond this situation - to a discrete random variable taking values 0, 1, 2, .... whereupon it loses it's real life meaning.

So unfortunately there is not a clear connection. It's just a discrete distribution that can be used to model claim numbers as it takes values 0, 1, 2, ... (like the Poisson). However it is a good alternative to the Poisson as it doesn't have equal mean and variance.

Sorry it's not the answer you'd like!
 
You must log in or register to reply here.
Back
Top