Computation of Compound Distributions II: Discretization Errors and Richardson Extrapolation

Abstract
The standard methods for the calculation of total claim size distributions and ruin probabilities, Panjer recursion and algorithms based on transforms, both apply to lattice-type distributions only and therefore require an initial discretization step if continuous distribution functions are of interest. We discuss the associated discretization error and show that it can often be reduced substantially by an extrapolation technique.
Volume
30:2
Page
309-331
Year
2000
Categories
Financial and Statistical Methods
Aggregation Methods
Panjer
Financial and Statistical Methods
Loss Distributions
Severity
Publications
ASTIN Bulletin
Authors
Renate Hermesmeier
Rudolf Grübel