Risk Management and actuarial applications of intrinsic discrepancy loss function

Presenter
Professor Udi Makov
Actuarial Research Center
University of Haifa, Israel

Abstract
One of the main problems in risk management is the evaluation of risk measures, which are typically explored for their mathematical properties, under the assumption that all of the underlying parameters of the loss distribution are known.   In practice, little attention is given to the impact the choice of parameter estimates has on the accuracy of such measures.  We propose to estimate these parameters by minimizing the expectation of the intrinsic discrepancy loss function (IDLF), which is the inherent loss function arising only from the underlying distribution, without any external subjective considerations.

In the first part of the talk, we discuss the intrinsic estimation of the mean of the Tweedie family, which is a subclass of the reproductive exponential dispersion family, a reach family with wide applications in risk management, and provide the IDLF of the family and approximate actuarial credibility formulae.

In the second part, we provide a numerical study of the estimates of the Value at Risk (VaR) and the Tail Conditional Expectation (TCE) of the gamma loss distribution using the IDLF and its approximation.

Biography
Udi Makov is a professor of statistics at the University of Haifa, where he serves as the chairman of the board of the Actuarial Research Center and the director of the M.A. Program in Actuarial Science. His current research focuses on predictive modelling and risk measures. He holds B.Sc. and M.Sc. degrees from the Technion-Israel Institute of Technology, and a PhD from University College, London.

Professor Makov is the Head Actuary in Setoo, a startup promoting parametric insurance products, where he is responsible for actuarial research and for introducing aspects of advanced statistics into algorithmic development.  Until recently he was the head of actuarial research, Verisk Telematics Innovation Center (Tel-Aviv), where he was responsible for promoting actuarial research in the context of Usage-Based Insurance.