The Tail Probability of Discounted Sums of Pareto-like Losses in Insurance

Scandinavian Actuarial Journal, Vol. 6, pp. 446-461, 2005

Posted: 18 Dec 2005

See all articles by Marc Goovaerts

Marc Goovaerts

Catholic University of Leuven (KUL) - Department of Economics

Rob Kaas

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Roger J. A. Laeven

University of Amsterdam - Department of Quantitative Economics (KE)

Qihe Tang

University of Amsterdam - Amsterdam School of Economics (ASE)

Raluca Vernic

Ovidius University of Constanta

Abstract

In an insurance context, the discounted sum of losses within a finite or infinite time period can be described as a randomly weighted sum of a sequence of independent random variables. These independent random variables represent the amounts of losses in successive development years, while the weights represent the stochastic discount factors. In this paper, we investigate the problem of approximating the tail probability of this weighted sum in the case when the losses have Pareto-like distributions and the discount factors are mutually dependent. We also give some simulation results.

Keywords: Asymptotics, (Log) elliptical distribution, (Log) normal variance-mean mixed distribution, Pareto-like distribution, Tail probability

JEL Classification: G22

Suggested Citation

Goovaerts, Marc and Kaas, Rob and Laeven, Roger Jean Auguste and Tang, Qihe and Vernic, Raluca, The Tail Probability of Discounted Sums of Pareto-like Losses in Insurance. Scandinavian Actuarial Journal, Vol. 6, pp. 446-461, 2005, Available at SSRN: https://ssrn.com/abstract=869237

Marc Goovaerts

Catholic University of Leuven (KUL) - Department of Economics ( email )

Leuven, B-3000
Belgium
+32 0 16 32 7446 (Phone)
+32 0 16 32 3740 (Fax)

Rob Kaas

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Roger Jean Auguste Laeven (Contact Author)

University of Amsterdam - Department of Quantitative Economics (KE) ( email )

Valckenierstraat 65-67
Amsterdam, 1018 XE
Netherlands
+31 20 525 4252 (Phone)

HOME PAGE: http://www.rogerlaeven.com

Qihe Tang

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Raluca Vernic

Ovidius University of Constanta ( email )

b-dul Mamaia nr. 124
Constanta, 900527
Romania

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
805
PlumX Metrics