Department seminar by Łukasz Delong

Friday, November 12, 2021 10:00 am - 10:00 am EST (GMT -05:00)

Please Note: This seminar will be given online.

Actuarial Science and Financial Mathematics seminar series

Łukasz Delong
Warsaw School of Economics

Link to join seminar: Hosted on Zoom

Gamma Mixture Density Networks and their application to modelling insurance claim amounts

We discuss how mixtures of Gamma distributions with mixing probabilities, shape and rate parameters depending on features can be fitted with neural networks.  We develop two versions of the EM algorithm for fitting so-called Gamma Mixture Density Networks, which we call the EM network boosting algorithm and the EM forward network algorithm, and we test their implementation together with the choices of hyperparameters. A simulation study shows that our algorithms perform very well on synthetic data sets. We further illustrate the application of the Gamma Mixture Density Network on a real data set of motor insurance claim amounts and conclude that Gamma Mixture Density Networks can improve the fit of  the regression model and the predictions of the claim severities used for rate-making compared to classical actuarial techniques. This is a joint work with M. Lindholm and M.V.Wuthrich.