UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN Actuarial Science Program DEPARTMENT OF MATHEMATICS

Math 478 / 568 Actuarial Modeling Prof. Rick Gorvett Spring 2013

Homework Assignment # 5 (max. points = 10) Due at the beginning of class on Thursday, March 14, 2013 You are encouraged to work on these problems in groups of no more than 3 or 4. However, each student must hand in her/his own answer sheet. Please show your work enough to show that you understand how to do the problem and circle your final answer. Full credit can only be given if the answer and approach are appropriate. Please provide answers to two decimal places. Each problem is worth one point. Note: Homework assignments are due at the beginning of the class. If you arrive at the class after it has started, you must hand in your assignment upon entering the classroom. Assignments will not be accepted at the end of the class period. Note: For many problems below, formulas in Appendix A of the course textbook are useful. (The Appendix is also available online at http://www.soa.org/files/pdf/edu-2009-fall-exam-ctable.pdf .) (1) In a sample of size fifteen, you observe the following values from distribution X: 2 1 1 2 4 6 1 2 4 8 1 1 1 6 2

Determine the Nelson-alen estimate of the cumulative hazard rate function at x = 7.

Problems (2) and (3): You are given the following exposure and loss data from a survival study (where yj is the time of death for each of a cohort of 20 people): j 1 2 3 4 5 6 7 8 9 10 yj 2 3 4 7 9 10 12 15 18 20 sj 3 2 1 4 2 1 2 2 2 1
1

(2)

Find the Nelson-alen estimate of the cumulative hazard rate at time 8, and use it to (8) . estimate the survival function, S
(8) . Determine the Kaplan-Meier estimate of the survival function at time 8, S

(3)

(4)

From a population having cumulative distribution function F you are given the following sample: 4 4 8 11 12 12 15 19 22 24

Calculate the kernel distribution function estimate of F(14), using the uniform kernel with a bandwidth of 4.0. (5) Using the same population and sample as in problem (5) above, calculate the kernel probability density function estimate of f (14), using the triangular kernel with a bandwidth of 4.0. For the data in the table below, determine the Greenwood Approximation of the variance (5) of the Kaplan-Meier product-limit estimate S j 1 2 3 4 (7) yj 1 4 6 7 sj 3 2 4 1 rj 10 7 5 1

(6)

You are given the following sample data: 2 3 3 4 8 12 15 29

Find the smoothed empirical estimate of the 80th percentile, and use it to determine the percentile matching estimate of the mean of an exponential distribution. (8) The observations 5, 15, 25, 30, 50 were obtained as a random sample from a gamma distribution with unknown parameters and . Estimate these parameters by the method of moments. A random variable is suspected of being a single-parameter Pareto distribution with = 1000, and parameter . You observe the following sample of values from the distribution: 1200 1500 2000 2500 3400 Determine the maximum likelihood estimate of .
2

(9)

(10)

An insurance policy has a deductible of 200 and a policy limit (maximum insurer payment per loss) of 800. The five insurer loss payments under this policy have been 300, 500, 700, and 2 payments of 800 each. Assuming the ground-up losses were generated by a distribution of the form f ( x) e x , x>0, find the maximum likelihood estimate of . Show your development of the likelihood function.