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Title: Credibility Models with Time-varying Trend Components
Author(s): LEDOLTER, Johannes , KLUGMAN, Stuart , LEE, Chang-Soo
Journal: ASTIN Bulletin
Volume: 21    Issue: 1   Date: April 1991   
Pages: 73-91
DOI: 10.2143/AST.21.1.2005402

Abstract :
Traditional credibility models have treated the process generating the losses as stable over time, perhaps with a deterministic trend imposed. However, there is ample evidence that these processes are not stable over time. What is required is a method that allows for time-varying parameters in the process, yet still provides the shrinkage needed for sound ratemaking. In this paper we use an automobile insurance example to illustrate how this can be accomplished.