A truncated version of the birnbaum-saunders distribution with an application in financial risk

S. Ejaz Ahmed, Claudia Castro-Kuriss, Esteban Flores, VICTOR ELISEO LEIVA SANCHEZ, Antonio Sanhueza

Research output: Contribution to journalArticlepeer-review

25 Scopus citations

Abstract

In many Solvency and Basel loss data, there are thresholds or deductibles that affect the analysis capability. On the other hand, the Birnbaum-Saunders model has received great attention during the last two decades and it can be used as a loss distribution. In this paper, we propose a solution to the problem of deductibles using a truncated version of the Birnbaum-Saunders distribution. The probability density function, cumulative distribution function, and moments of this distribution are obtained. In addition, properties regularly used in insurance industry, such as multiplication by a constant (inflation effect) and reciprocal transformation, are discussed. Furthermore, a study of the behavior of the risk rate and of risk measures is carried out. Moreover, estimation aspects are also considered in this work. Finally, an application based on real loss data from a commercial bank is conducted.

Original languageEnglish
Pages (from-to)293-311
Number of pages19
JournalPakistan Journal of Statistics
Volume26
Issue number1
StatePublished - 1 Jan 2010

Keywords

  • Deductible
  • Loss models
  • Risk analysis
  • Truncated distributions

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