Random Shifting and Scaling of Insurance Risks

Abstract

Random shifting typically appears in credibility models whereas random scaling is often encountered in stochastic models for claim sizes reflecting the time-value property of money. In this article we discuss some aspects of random shifting and random scaling of insurance risks focusing in particular on credibility models, dependence structure of claim sizes in collective risk models, and extreme value models for the joint dependence of large losses. We show that specifying certain actuarial models using random shifting or scaling has some advantages for both theoretical treatments and practical applications.

Keywords

• random shifting and scaling
• credibility premium
• elliptically symmetric distribution
• Lp Dirichlet distribution
• Archimedean copula
• infinite dimensions
• joint tail dependence