On Stop-Loss Premiums for the Individual Model
R. Kaas,
A. E. van Heerwaarden and
Marc Goovaerts
ASTIN Bulletin, 1988, vol. 18, issue 1, 91-97
Abstract:
It is shown how the upper bounds for stop-loss premiums (and approximations to tail probabilities) obtained by replacing the individual model for a portfolio of risks by the collective model can be improved upon at the cost of only slightly more computer time. The method used is simply to keep a restricted number of large risks as they are instead of approximating them by a compound Poisson distribution. In a real-life example, the relative error in the stop-loss premium is shown to be reduced drastically by keeping only 10 out of 743 risks unchanged.
Date: 1988
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