On the Stability of Recursive Formulas

Harry H. Panjer and Shaun Wang,

ASTIN Bulletin, 1993, vol. 23, issue 2, 227-258

Abstract: Based on recurrence equation theory and relative error (rather than absolute error) analysis, the concept and criterion for the stability of a recurrence equation are clarified. A family of recursions, called congruent recursions, is proved to be strongly stable in evaluating its non-negative solutions. A type of strongly unstable recursion is identified. The recursive formula discussed by Panjer (1981) is proved to be strongly stable in evaluating the compound Poisson and the compound Negative Binomial (including Geometric) distributions. For the compound Binomial distribution, the recursion is shown to be unstable. A simple method to cope with this instability is proposed. Many other recursions are reviewed. Illustrative numerical examples are given.

Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:astinb:v:23:y:1993:i:02:p:227-258_01

Access Statistics for this article

More articles in ASTIN Bulletin from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().