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
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
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