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Chapter 14: Section 8

J

jensen

Member
Hi

Under 8.1, the first sentence of the second paragraph states that the ODP model can accept negative increments. However, this (to me) contradicts to section 5.4 pg 19 fourth bullet and subsequent paragraph states that we assume increments are all positive and that negative increments need to be adjusted.

Am I reading this the wrong way?
 
Dear Jensen,

The key point here is the proviso in the second paragraph of Section 8.1, ie "as long as the development factor across the development period as a whole is greater than one". Therefore, the two statements are mutually consistent.

Alternatively, you could rephrase the fourth bullet point of Section 5.4 to say "the total incremental claims are positive for all development periods".

I hope this helps.

Kind regards,

Katherine.
 
Hi Katherine

If I understand you correctly, ODP can accept small individual negative increments, as long as the total incremental in each development period is positive, ie the sum in the columns of the triangles?

Thanks a lot. It really helps now :)
 
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