Download This PaperA Simple Approximation to the Convolution of Gamma Distributions
CentER Discussion Paper No. 2007-70
25 Pages Posted: 9 May 2006
Date Written: September 2007
Abstract
The exact expressions for the convolutions of gamma distributions with different scale parameters is quite complicated. The approximation by means of another gamma distribution is shown to be remarkably accurate for wide ranges of the parameter values, especially if more than two random variables are involved. The approximation is particularly good for the upper quantiles that play an important role in auditors' decisions.
Keywords: approximating distributions, convolution, gamma distribution
JEL Classification: C16
Suggested Citation: Suggested Citation
Stewart, Trevor and Strijbosch, L.W.G. and Moors, Hans and Batenburg, Paul van, A Simple Approximation to the Convolution of Gamma Distributions (September 2007). CentER Discussion Paper No. 2007-70, Available at SSRN: https://ssrn.com/abstract=900109 or http://dx.doi.org/10.2139/ssrn.900109
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