Stable-1/2 bridges and insurance

• Autorzy: Edward Hoyle , Lane P. Hughston , Andrea Macrina
• Języki publikacji: EN

Abstrakty

EN

We develop a class of non-life reserving models using a stable-1/2 random bridge to simulate the accumulation of paid claims, allowing for an essentially arbitrary choice of a priori distribution for the ultimate loss. Taking an information-based approach to the reserving problem, we derive the process of the conditional distribution of the ultimate loss. The "best-estimate ultimate loss process" is given by the conditional expectation of the ultimate loss. We derive explicit expressions for the best-estimate ultimate loss process, and for expected recoveries arising from aggregate excess-of-loss reinsurance treaties. Use of a deterministic time change allows for the matching of any initial (increasing) development pattern for the paid claims. We show that these methods are well-suited to the modelling of claims where there is a non-trivial probability of catastrophic loss. The generalized inverse-Gaussian (GIG) distribution is shown to be a natural choice for the a priori ultimate loss distribution. For particular GIG parameter choices, the best-estimate ultimate loss process can be written as a rational function of the paid-claims process. We extend the model to include a second paid-claims process, and allow the two processes to be dependent. The results obtained can be applied to the modelling of multiple lines of business or multiple origin years. The multi-dimensional model has the property that the dimensionality of calculations remains low, regardless of the number of paid-claims processes. An algorithm is provided for the simulation of the paid-claims processes.

Kategorie tematyczne

• 91B25: Asset pricing models
• 62P05: Applications to actuarial sciences and financial mathematics
• 62F15: Bayesian inference
• 60G52: Stable processes
• 91B30: Risk theory, insurance

• Wydawca: Institute of Mathematics Polish Academy of Sciences
• Czasopismo: Banach Center Publications
• Rocznik: 2015
• Tom: 104
• Numer: 1
• Strony: 95-120

Daty

wydano

2015

Twórcy

autor

Edward Hoyle

• Fulcrum Asset Management, Marble Arch House, London W1H 5BT, UK

autor

Lane P. Hughston

• Department of Mathematics, Brunel University London, Uxbridge UB8 3PH, UK
• Department of Mathematics, University College London, London WC1E 6BT, UK

autor

Andrea Macrina

• Department of Mathematics, University College London, London WC1E 6BT, UK
• Department of Actuarial Science, University of Cape Town, Rondebosch 7701, RSA

Identyfikatory

DOI

10.4064/bc104-0-5