Abstract
There is some confusion among operational risk practitioners regarding the implications of the loss data collection threshold and the estimation of "truncated" or "shifted" distributions. Claims that shifted models result in biased parameter estimates rely on the premise that the "true" model is known to be truncated, and do not objectively evaluate shifted distributions. We systematically analyze the performance of shifted and truncated lognormal models and illustrate the use of Vuong's likelihood ratio test for model selection. We conclude that truncated and shifted lognormal models are equally valid or invalid approaches for estimating loss severity with a data collection threshold.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
