Loss Data Analysis

12Computations using the maxentropic density

In the previous chapters we devoted much effort to solving the problem of determining probability density from a few values of its Laplace transform, and to testing the quality of these reconstructions. In particular, we supposed that the unknown density is that of a positive compound random variable used to model losses. In this chapter we carry out some numerical computations with the maxentropic densities obtained in the previous chapters to answer some typical questions.

As one of the important applications of the methodology is to describe operational risk losses in a bank, or accumulated claims in an insurance company, the important applications to be considered include the VaR (value at risk) ...