BS PAID METHOD
In the practice problems for BS-PAID Method, I am wondering how the tail factor for the Restated CPL (in the last step) is calculated in each of them?
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In the practice problems for BS-PAID Method, I am wondering how the tail factor for the Restated CPL (in the last step) is calculated in each of them?
Comments
In that particular practice problem, I just used the "square root rule" that I discussed in chapter 7. I took the selected LDF one column to the left, which was 1.033, and took the square root which gives 1.016. The square root rule is not discussed in Friedman - it's just something I used to do when I worked in reserving.
You can use anything reasonable for the tail factor. Sometimes exam problems give you a triangle that is obviously not fully developed and expect you to realize a tail factor is required. It doesn't matter so much what you pick, as long as you pick something.
You'll also often see this phrase in exam problems:
This is their way of saying that a tail factor would not be required. Or in other words, that the tail factor is just 1.000.
Thanks, Graham!