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Home  >  Transasctions of NAMP VOL3

23. Hierarchically Structured Model for Predicting the Distribution of Insurance Risk by Agwuegbo S.O.N, Onugha E.E and Ezepue P.O Transactions of NAMP Vol 3, (Jan, 2017), pp 169 – 176
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Abstract

Hierarchically structured models provide the basis for an entirely different approach in data analysis. It originated in an attempt at using conceptual model and has been applied to a wide variety of statistical problems. In this paper, emphasis is on exploring hierarchically structured modelling approach as an alternative model for predicting the distribution of insurance risks. The cardinal approach of the hierarchically structured model is to impose structures into state spaces and to work with subsets of states by partitioning the original state spaces into hierarchically organized subsets. Dynamics in the state space were approximated with advantage by random walk on trees. The result of the study on insurance risk shows that hierarchically structured model allows for the realization of estimated probability distribution which determines uniquely how the system evolves with time and provides a generalization of an ARIMA (1, 0, 0) models.

Keywords: State space, Dynamics, Binary Trees, Random Walk, Markov Processes

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