A Claims Persistence Process and Insurance
Charles S. Tapiero
NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering
affiliation not provided to SSRN
September 27, 2008
Insurance: Mathematics and Economics, Vol. 44, No. 3, 2009
The purpose of this paper is to introduce and construct a state dependent counting and persistent random walk. Persistence is imbedded in a Markov chain for predicting insured claims based on their current and past period claim. We calculate for such a process, the probability generating function of the number of claims over time and as a result are able to calculate their moments. Further, given the claims severity probability distribution, we provide both the claims process generating function as well as the mean and the claim variance that an insurance firm confronts over a given period of time and in such circumstances. A number of results and applications are then outlined (such as a Compound Claim Persistence Process).
Number of Pages in PDF File: 22
Keywords: Random walk, Persistence, Insurance claims, Value at risk
Date posted: July 16, 2009
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