Asymptotic Distributions of the Overshoot and Undershoots for the Lévy Insurance Risk Process in the Cramér and Convolution Equivalent Cases

Details Asymptotic Distributions of the Overshoot and Undershoots for the Lévy Insurance Risk Process in the Cramér and Convolution Equivalent Cases Asymptotic Distributions of the Overshoot and Undershoots for the Lévy Insurance Risk Process in the Cramér and Convolution Equivalent Cases

2011-06-16

arxiv.org/abs/1106.3292v1

Mathematics

Probability

Scientific paper

Recent models of the insurance risk process use a L\'evy process to generalise the traditional Cram\'er-Lundberg compound Poisson model. This paper is concerned with the behaviour of the distributions of the overshoot and undershoots of a high level, for a L\'{e}vy process which drifts to $-\infty$ and satisfies a Cram\'er or a convolution equivalent condition. We derive these asymptotics under minimal conditions in the Cram\'er case, and compare them with known results for the convolution equivalent case, drawing attention to the striking and unexpected fact that they become identical when certain parameters tend to equality. Thus, at least regarding these quantities, the "medium-heavy" tailed convolution equivalent model segues into the "light-tailed" Cram\'er model in a natural way. This suggests a usefully expanded flexibility for modelling the insurance risk process. We illustrate this relationship by comparing the asymptotic distributions obtained for the overshoot and undershoots, assuming the L\'evy process belongs to the "GTSC" class.

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