### Role of Generalised Linear Model in non-life pricing Phase3

Before reading this article, make sure that you read phase1 and phase2. Here are the link:

Phase1: http://www.actuarysense.com/2018/10/role-of-generalised-linear-model-in-non.html

Phase2: http://www.actuarysense.com/2018/11/role-of-generalised-linear-model-in-non.html So we know that the purpose of GLM is to find the relationship between mean of the response variable and covariates.

In this Article we are going to talk about Linear Predictors.

Phase1: http://www.actuarysense.com/2018/10/role-of-generalised-linear-model-in-non.html

Phase2: http://www.actuarysense.com/2018/11/role-of-generalised-linear-model-in-non.html So we know that the purpose of GLM is to find the relationship between mean of the response variable and covariates.

In this Article we are going to talk about Linear Predictors.

**: Let’s denote it with, “η” (eta). So, linear predictor is actually a function of covariates. For example, in the normal linear model where function is Y = B0 + B1x. So linear predictor will be η = B0 + B1x. Always note that linear predictor has to be linear in its parameter. In this case parameters are B0 and B1. But still the question is how I came up with B0 + B1x as a function? First of all, note that broadly there are two types of Covariates. 1. Variables: It takes the numerical value. For example: age of policyholder, years of ex…***Linear Predictor*
Thankyou for sharing this wonderful article. But I have a doubt~is Random Variable- a variable to which probability is associated? Random variable is a value associated with a random experiment. In that is there really a role of probability? Because in the example you mentioned no. of days in a month can be 28,29,30& 31. There is no probability. It is all about values. Please share your thoughts on this. Thankyou!

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