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Simulation of Risk Processes

  • Burnecki, Krzysztof
  • Weron, Rafal

This paper is intended as a guide to simulation of risk processes. A typical model for insurance risk, the so-called collective risk model, treats the aggregate loss as having a compound distribution with two main components: one characterizing the arrival of claims and another describing the severity (or size) of loss resulting from the occurrence of a claim. The collective risk model is often used in health insurance and in general insurance, whenever the main risk components are the number of insurance claims and the amount of the claims. It can also be used for modeling other non-insurance product risks, such as credit and operational risk. In this paper we present efficient simulation algorithms for several classes of claim arrival processes.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25444.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:25444
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  1. Härdle, Wolfgang Karl & Burnecki, Krzysztof & Weron, Rafał, 2004. "Simulation of risk processes," Papers 2004,01, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  2. Hormann, W., 1993. "The transformed rejection method for generating Poisson random variables," Insurance: Mathematics and Economics, Elsevier, vol. 12(1), pages 39-45, February.
  3. Anna Chernobai & Krzysztof Burnecki & Svetlozar Rachev & Stefan Trück & Rafał Weron, 2006. "Modelling catastrophe claims with left-truncated severity distributions," Computational Statistics, Springer, vol. 21(3), pages 537-555, December.
  4. repec:cup:cbooks:9780521764650 is not listed on IDEAS
  5. Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
  6. Pavel Cizek & Wolfgang Karl Härdle & Rafal Weron, 2005. "Statistical Tools for Finance and Insurance," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0501.
  7. Aleksander Janicki & Aleksander Weron, 1994. "Simulation and Chaotic Behavior of Alpha-stable Stochastic Processes," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook9401.
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