Entropy, a useful concept in risk theory
- 1 July 1986
- journal article
- research article
- Published by Taylor & Francis in Scandinavian Actuarial Journal
- Vol. 1986 (3-4) , 223-235
- https://doi.org/10.1080/03461238.1986.10413808
Abstract
Exponential bounds for ruin probabilities similar to the Lundberg bound e-Ru are considered. They are naturally expressed in terms of the entropy function of the claims distribution. Such bounds are useful because they are easy to calculate numerically, and they are sufficiently accurate for practical purposes. A numerical example from life insurance is presented. The entropy estimates have an interesting structure familiar from thermodynamics, and concepts like “temperature” and “equilibrium” turn out to have relevance in risk theory.Keywords
This publication has 2 references indexed in Scilit:
- Numerical evaluation of the compound Poisson distribution: Recursion or Fast Fourier Transform?Scandinavian Actuarial Journal, 1984
- A Laplace approximation for sums of independent random variablesProbability Theory and Related Fields, 1982