CAS Exam 7 Spring 2016, Question 13
Study guide: Exam 7
An actuary is reviewing residual plots from an over-dispersed Poisson bootstrapping model. The actuary chooses to review a plot of the residuals vs. development periods.
Part a (0.5 points)
Identify two other residual plots the actuary might choose to review.
Part b (0.5 points)
Briefly describe two features of residual plots that would suggest a need for the actuary to adjust the model.
Part c (0.5 points)
In reviewing the plot of residuals vs. development periods, the actuary notices that the residuals appear to have larger absolute values at lower maturities. The actuary argues this is to be expected, because the incremental values are much larger in the earlier development periods and hence these incremental values should have a higher variance.
Assess the validity of the actuary's reasoning.
Answer this question and see the worked solution
Concepts tested
- Bootstrap
- Residual Plot
- ODP Bootstrap Model
- Heteroscedasticity
- Pearson Residual
- Data Diagnostic Analysis