Computing finite-time survival probabilities using multinomial approximations of risk models

M. Costabile, I. Massabò and E. Russo

Scandinavian Actuarial Journal, 2015, vol. 2015, issue 5, 406-422

Abstract: We consider the problem of computing finite-time survival probabilities for various risk models. We develop an approximating discrete-time multinomial lattice that mimics the evolution of the corresponding continuous risk process. A simple recursive algorithm to compute survival probabilities is described. Numerical results show that the proposed scheme yields accurate values in all the considered cases.

Date: 2015
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DOI: 10.1080/03461238.2013.838603

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