Rate of convergence of the probability of ruin in the Cramér–Lundberg model to its diffusion approximation

Asaf Cohen and Virginia R. Young

Insurance: Mathematics and Economics, 2020, vol. 93, issue C, 333-340

Abstract: We analyze the probability of ruin for the scaled classical Cramér–Lundberg (CL) risk process and the corresponding diffusion approximation. The scaling, introduced by Iglehart (1969) to the actuarial literature, amounts to multiplying the Poisson rate λ by n, dividing the claim severity by n, and adjusting the premium rate so that net premium income remains constant.

Keywords: Investment analysis; Probability of ruin; Cramér–Lundberg risk process; Diffusion approximation; Approximation error (search for similar items in EconPapers)
JEL-codes: C60 G22 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:93:y:2020:i:c:p:333-340

DOI: 10.1016/j.insmatheco.2020.06.003

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