The compound Poisson random variable’s approximation to the individual risk model
نویسندگان
چکیده
In this paper we study approximating the total loss associated with the individual insurance risk model by a compound Poisson random variable. By minimizing the expectation of the absolute deviation of the compound Poisson random variable from the true total loss, we investigate not only the optimal compound Poisson random variable but also the numerical calculation of the approximation error. We also discuss the influence of the Poisson parameter on the approximation error. © 2004 Elsevier B.V. All rights reserved. JEL classification: C63; O29 2000 Subject and Insurance Branch Codes: IM20
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