Burnecki, Krzysztof and Janczura, Joanna and Weron, Rafal (2010): Building Loss Models.

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Abstract
This paper is intended as a guide to building insurance risk (loss) models. A typical model for insurance risk, the socalled collective risk model, treats the aggregate loss as having a compound distribution with two main components: one characterizing the arrival of claims and another describing the severity (or size) of loss resulting from the occurrence of a claim. In this paper we first present efficient simulation algorithms for several classes of claim arrival processes. Then we review a collection of loss distributions and present methods that can be used to assess the goodnessoffit of the claim size distribution. The collective risk model is often used in health insurance and in general insurance, whenever the main risk components are the number of insurance claims and the amount of the claims. It can also be used for modeling other noninsurance product risks, such as credit and operational risk.
Item Type:  MPRA Paper 

Original Title:  Building Loss Models 
Language:  English 
Keywords:  Insurance risk model; Loss distribution; Claim arrival process; Poisson process; Renewal process; Random variable generation; Goodnessoffit testing 
Subjects:  G  Financial Economics > G2  Financial Institutions and Services > G22  Insurance; Insurance Companies C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C63  Computational Techniques; Simulation Modeling C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C46  Specific Distributions; Specific Statistics C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C15  Statistical Simulation Methods: General G  Financial Economics > G3  Corporate Finance and Governance > G32  Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill 
Item ID:  25492 
Depositing User:  Rafal Weron 
Date Deposited:  28. Sep 2010 20:42 
Last Modified:  13. Feb 2013 00:00 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/25492 