Model Selection and Averaging in Financial Risk Management
| Autor: | Brian M. Hartman, Chris Groendyke |
|---|---|
| Rok vydání: | 2013 |
| Předmět: |
Statistics and Probability
Economics and Econometrics Actuarial science Process (engineering) Model selection media_common.quotation_subject Financial risk management Sample size determination Life insurance Financial crisis Economics Quality (business) Asset (economics) Statistics Probability and Uncertainty media_common |
| Zdroj: | North American Actuarial Journal. 17:216-228 |
| ISSN: | 2325-0453 1092-0277 |
| DOI: | 10.1080/10920277.2013.824374 |
| Popis: | Simulated asset returns are used in many areas of actuarial science. For example, life insurers use them to price annuities, life insurance, and investment guarantees. The quality of those simulations has come under increased scrutiny during the current financial crisis. When simulating the asset price process, properly choosing which model or models to use, and accounting for the uncertainty in that choice, is essential. We investigate how best to choose a model from a flexible set of models. In our regime-switching models the individual regimes are not constrained to be from the same distributional family. Even with larger sample sizes, the standard model-selection methods (AIC, BIC, and DIC) incorrectly identify the models far too often. Rather than trying to identify the best model and limiting the simulation to a single distribution, we show that the simulations can be made more realistic by explicitly modeling the uncertainty in the model-selection process. Specifically, we consider a parallel model... |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|