On the behavior of the high order stop-loss transform for convolutions with some applications

Idir Arab, Milto Hadjikyriakou and Paulo Eduardo Oliveira

Communications in Statistics - Theory and Methods, 2022, vol. 51, issue 14, 4638-4652

Abstract: High order stop-loss transforms provide a risk measure that enables some flexibility on the weight given to high or low values of the risk. We interpret stop-loss transforms as iterated distributions and prove a recursive representation for risks expressed as convolutions. We apply this to the case of gamma distributions with integer shape parameter, the Erlang distributions, proving that high order stop-loss transforms are equivalent to the tails of the exponential distribution. The latter result is also extended to general gamma distributions. Furthermore, we prove that this equivalence to exponential tails does not hold in general, by proving that the stop-loss transform for a Weilbull distribution degenerates, unless, of course, in the exponential case.

Date: 2022
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DOI: 10.1080/03610926.2020.1818101

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