Simulation of Risk Processes

Krzysztof Burnecki and Rafał Weron

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Risk process; Claim arrival process; Homogeneous Poisson process (HPP); Non-homogeneous Poisson process (NHPP); Mixed Poisson process; Cox process; Renewal process. (search for similar items in EconPapers)
JEL-codes: C15 C24 C63 G32 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cmp, nep-ias, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Simulation of risk processes (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25444

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