IAI Actuarial Core Principles · Actuarial Statistics · Generalised linear models
In a logistic GLM for whether a policyholder lapses, the fitted linear predictor for a certain policyholder is -1.0986 (that is, ln(1/3)). What is the fitted lapse probability?
The fitted lapse probability is 0.25. The logit link gives odds of exp(-1.0986), which is one third, and probability equals odds divided by one plus odds, so one third over four thirds equals 0.25.
- A0.25Correct
- B0.33
- C0.75
- D0.50
- 0.67
Explanation
Odds = exp(-1.0986) = 1/3. Probability = odds/(1+odds) = (1/3)/(4/3) = 0.25. The value 0.33 mistakes the odds for the probability.
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