Tuesday, 22 July 2014

Notes from the 2nd R in Insurance Conference

The 2nd R in Insurance conference took place last Monday, 14 July, at Cass Business School London.

This one-day conference focused once more on applications in insurance and actuarial science that use R. Topics covered included reserving, pricing, loss modelling, the use of R in a production environment and more.

In the first plenary session, Montserrat Guillen (Riskcenter, University of Barcelona) and Leo Guelman (Royal Bank of Canada, RBC Insurance) spoke about the rise of uplift models. These predictive models are used for improved targeting of policyholders by marketing campaigns, through the use of experimental data. The presenters illustrated the use of their uplift package (available on CRAN), which they have developed for such applications.


Thereafter, the programme consisted of a combination of contributed presentations and lightning talks, as well as a panel discusson on R at the interface of practitioner / academic interraction. The panel, drawn from academia and practice, discussed the efforts made in bridging through the use of R cultural and communication divides, as well as the challenges of developing collaborative business models that respond to market needs and the incentives of academic researchers.


In the closing plenary, Arthur Charpentier (Professor of Actuarial Science at UQAM, Canada) gave a non-Bayesian's account of Bayesian modelling in R. While many are sympathetic to the Bayesian paradigm, it is easy access to computational tools that makes its wider application a realistic prospect. The presenter demonstrated how Bayesian methods can be used to offer alternative analyses of standard actuarial problems.


The audience of the conference included both practitioners (70%) and academics (30%) who are active or interested in the applications of R in Insurance. It was a truly international event with speakers and delegates from many different countries, including USA, Canada, Belgium, Netherlands, Switzerland, Germany, Ireland, Argentina, France, Spain and of course the UK. The coffee breaks and conference dinner at Ironmongers Hall offered great networking opportunities.


All conference presentations are available on request.

Finally, we are grateful to our sponsors Mango Solutions, CYBAEA, PwC and RStudio. This conference would not have been possible without their generous support.

R in Insurance 2015


We are delighted to announce next year's event already. Following two years in London at Cass Business School, the conference will travel across the Channel to Amsterdam, 29 June 2015.


We are looking forward to seeing you there. Further details will be published on www.rininsurance.com.

Tuesday, 15 July 2014

Simple user interface in R to get login details

Occasionally I have to connect to services from R that ask for login details, such as databases. I don't like to store my login details in the R source code file, instead I would prefer to enter the my login details when I execute the code.


Fortunately, I found some old code in a post by Barry Rowlingson that does just that. It uses the tcltk package in R to create a little window in which the user can enter her details, without showing the password. The tcltk package is part of base R, which means the code will run on any operating system. Nice!



Session Info

R version 3.1.1 (2014-07-10)
Platform: x86_64-apple-darwin13.1.0 (64-bit)

locale:
[1] en_GB.UTF-8/en_GB.UTF-8/en_GB.UTF-8/C/en_GB.UTF-8/en_GB.UTF-8

attached base packages:
[1] tcltk stats graphics grDevices utils datasets methods base

Tuesday, 8 July 2014

googleVis 0.5.3 released

Recently we released googleVis 0.5.3 on CRAN. The package provides an interface between R and Google Charts, allowing you to create interactive web charts from R.

Screen shot of some of the Google Charts

Although this is mainly a maintenance release, I'd like to point out two changes:
  • Default chart width is set to 'automatic' instead of 500 pixels.
  • Intervals for columns roles have to end with the suffix ".i", with "i" being an integer. Several interval columns are allowed, see the roles demo and vignette for more details.
Those changes were required to fix the following issues:
  • The order of y-variables in core charts wasn't maintained. Thanks to John Taveras for reporting this bug.
  • Width and height of googleVis charts were only accepted in pixels, although the Google Charts API uses standard HTML units (for example, '100px', '80em', '60', 'automatic'). If no units are specified the number is assumed to be pixels. This has been fixed. Thanks to Paul Murrell for reporting this issue.
New to googleVis? Review the demo on CRAN.

Tuesday, 1 July 2014

Last chance to register for the R in Insurance conference


The registration for the 2nd R in Insurance conference at Cass Business School London will close this Friday, 4 July.

The programme includes talks from international practitioners and leading academics, see below. For more details and registration visit: http://www.rininsurance.com.

Still unsure? Review some impressions and presentations from last year's conference.

On behalf of the committee and sponsors, Mango Solutions, Cybaea, RStudio and PwC, we look forward to seeing you in London on 14 July!

Tuesday, 24 June 2014

Generating and visualising multivariate random numbers in R

This post will present the wonderful pairs.panels function of the psych package [1] that I discovered recently to visualise multivariate random numbers.

Here is a little example with a Gaussian copula and normal and log-normal marginal distributions. I use pairs.panels to illustrate the steps along the way.

I start with standardised multivariate normal random numbers:
library(psych)
library(MASS)
Sig <- matrix(c(1, -0.7, -.5,
                -0.7, 1, 0.6,
                -0.5, 0.6, 1), 
                nrow=3)
X <- mvrnorm(1000, mu=rep(0,3), Sigma = Sig, 
             empirical = TRUE)  
pairs.panels(X)

Next, I map the random figures into the interval [0,1] using the distribution function pnorm, so I end up with multivariate uniform random numbers:
U <- pnorm(X)
pairs.panels(U)

Finally, I transform the uniform numbers into the desired marginals:
Z <- cbind(
  A=qlnorm(U[,1], meanlog=-2.5, sdlog=0.25),
  B=qnorm(U[,2], mean=1.70, sd=0.1),
  C=qnorm(U[,3], mean=0.63,sd=0.08)
  )
pairs.panels(Z)

Those steps can actually be shorten with functions of the copula package [2].

Unfortunately, I struggled to install the copula package on my local Mac, running Mavericks. No CRAN binaries are currently available and gfortran is playing up on my system to install it from source. Thus, I quickly fired up an Ubuntu virtual machine on Amazon's EC2 Cloud and installed R. Within 15 minutes I was back in business - that is actually pretty amazing.
library(copula)
myCop=normalCopula(param=c(-0.7,-.5,0.6), dim = 3, dispstr = "un")
myMvd <- mvdc(copula=myCop, margins=c("lnorm", "norm", "norm"),
              paramMargins=list(list(meanlog=-2.5, sdlog=0.25),
                                list(mean=1.70, sd=0.1), 
                                list(mean=0.63,sd=0.08)) )
Z2 <- rmvdc(myMvd, 1000)
colnames(Z2) <- c("A", "B", "C")
pairs.panels(Z2)

References

[1] Revelle, W. (2014) psych: Procedures for Personality and Psychological Research, Northwestern University, Evanston, Illinois, USA, http://CRAN.R-project.org/package=psych Version = 1.4.5.

[2] Marius Hofert, Ivan Kojadinovic, Martin Maechler and Jun Yan (2014). copula: Multivariate Dependence with Copulas. http://CRAN.R-project.org/package=copula Version = 0.999-10

Session Info Local

R version 3.1.0 (2014-04-10)
Platform: x86_64-apple-darwin13.1.0 (64-bit)

locale:
[1] en_GB.UTF-8/en_GB.UTF-8/en_GB.UTF-8/C/en_GB.UTF-8/en_GB.UTF-8

attached base packages:
[1] stats graphics  grDevices utils datasets methods base     

other attached packages:
[1] psych_1.4.5 MASS_7.3-31

loaded via a namespace (and not attached):
[1] tools_3.1.0

Session Info EC2

R version 3.0.2 (2013-09-25)
Platform: x86_64-pc-linux-gnu (64-bit)

locale:
 [1] LC_CTYPE=en_US.UTF-8       LC_NUMERIC=C              
 [3] LC_TIME=en_US.UTF-8        LC_COLLATE=en_US.UTF-8    
 [5] LC_MONETARY=en_US.UTF-8    LC_MESSAGES=en_US.UTF-8   
 [7] LC_PAPER=en_US.UTF-8       LC_NAME=C                 
 [9] LC_ADDRESS=C               LC_TELEPHONE=C            
[11] LC_MEASUREMENT=en_US.UTF-8 LC_IDENTIFICATION=C       

attached base packages:
[1] stats graphics  grDevices utils datasets  methods   base     

other attached packages:
[1] psych_1.4.5 copula_0.999-10

loaded via a namespace (and not attached):
[1] ADGofTest_0.3     grid_3.0.2        gsl_1.9-10        lattice_0.20-24  
[5] Matrix_1.1-2      mvtnorm_0.9-99992 pspline_1.0-16    stabledist_0.6-6 
[9] stats4_3.0.2

Tuesday, 17 June 2014

Who will win the World Cup and which prediction model?

The World Cup has finally kicked off last Thursday and I have seen some fantastic games already. Perhaps the Netherlands appears to be the strongest side so far, following their 5-1 victory over Spain.

To me the question is not only which country will win the World Cup, but also which prediction model will come closest to the actual results. Here I present three teams, FiveThirtyEight, a polling aggregation website, Groll & Schauberger, two academics from Munich and finally Lloyd's of London, the insurance market.

The guys around Nate Silver at FiveThirtyEight have used the ESPN’s Soccer Power Index to predict the outcomes of games and continue to update their model. Brazil is their clear favourite.

Andreas Groll & Gunther Schauberger from the LMU Munich developed a model, which like the approach from FiveThirtyEight aims to estimate the probability of a team winning the world cup. But unlike FiveThirtyEight, they see Germany to take the trophy home.

Lloyd's chose a different approach for predicting the World Cup final. The insurance market looked at the risk aspect of the teams and ranked the teams by their insured value. Arguably the better a team the higher their insured value. As a result Lloyd's predicts Germany to win the World Cup.

Quick reminder; what's the difference between insurance and gambling? Gambling introduces risk, where none exists. Insurance mitigates risk, where risk exists.

Source: Research carried out by Cebr for Lloyd’s, June 2014.

Here are the three rankings combined in one table. None of the three predictions have put the Netherlands into the top 5, despite the fact that they played against Spain in the final four years ago. Interestingly, as of this morning the bookmakers favourites are Brazil, Argentina, Germany and the Netherlands with implied probabilities of about 25%, 20%, 18% and 7% respectively.



R Code

Tuesday, 10 June 2014

The joy of joining data.tables

The example I present here is a little silly, yet it illustrates how to join tables with data.table in R.

Mapping old data to new data

Categories in general are never fixed, they always change at some point. And then the trouble starts with the data. For example not that long ago we didn't distinguish between smartphones and dumbphones, or video on demand and video rental shops.

I would like to back track price change data for smartphones and online movie rental shops, assuming that their earlier development can be set to the categories they were formerly part of, namely mobile and video rental shops to create indices.

Here is my toy data:



I'd like to create price indices for all products and where data for the new product categories is missing, use the price changes of the old product category.


The data.table package helps here. I start with my original data, convert it into a data.table and create mapping tables. That allows me to add the old product with its price change to the new product. The trick here is to set certain columns as key. Two data tables with the same key can easily be joined. Once I have the price changes for products and years the price index can be added. The plot illustrates the result, the R code is below.