Asymptotic distributions of the overshoot and undershoots for the Lévy insurance risk process in the Cramér and convolution equivalent cases
AbstractRecent models of the insurance risk process use a Lévy process to generalise the traditional Cramér–Lundberg compound Poisson model. This paper is concerned with the behaviour of the distributions of the overshoot and undershoots of a high level, for a Lévy process which drifts to −∞ and satisfies a Cramér or a convolution equivalent condition. We derive these asymptotics under minimal conditions in the Cramér case, and compare them with known results for the convolution equivalent case, drawing attention to the striking and unexpected fact that they become identical when certain parameters tend to equality. Thus, at least regarding these quantities, the “medium-heavy” tailed convolution equivalent model segues into the “light-tailed” Cramér model in a natural way. This suggests a usefully expanded flexibility for modelling the insurance risk process. We illustrate this relationship by comparing the asymptotic distributions obtained for the overshoot and undershoots, assuming the Lévy process belongs to the “GTSC” class.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 51 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/505554
Insurance risk process; Lévy process; Cramér condition; Convolution equivalent distributions; Ruin time; Overshoot; Undershoot; IM11; IM13;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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