Estimation, Evaluation, and Selection of Actuarial Models

Appendix B
Using Microsoft Excel TM
Excel is a useful tool for doing the calculations in this Note. In particular, the Solver add-in has the
ability to numerically maximize functions of several variables. Its use is covered in this Appendix.
The Solver is not automatically available when Excel is installed. If it is available, you can tell
because “Solver” will appear on Excel’s Tools menu. If it does not, it must be added in. To do
this, select “Add-ins” from the Tools menu, check the Solver box and then click OK. If Solver does
not appear on the Add-in list, Solver was not installed when Excel was installed on your machine.
This will be the case if a typical (as opposed to full or custom) install was done. To install Solver,
go to Add/Remove Programs in the Control Panel and modify your Office installation. You will
not need to reinstall all of Office to add the Solver.
Use of the Solver is illustrated with an example in which maximum likelihood estimates for the
gamma distribution are found for Data Set B right censored at 200. If you have not read far enough
to appreciate this example, it is not important.
Begin by setting up a spreadsheet in which the parameters (alpha and theta) are in identifiable
cells as is the objective function (lnL). In this example the parameters are in E1 and E2 and the
objective function is in E3.
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