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Convex Ordering of Random Variables and its Applications in Econometrics and Actuarial Science

Journal Name:

  • European Journal of Pure and Applied Mathematics

Publication Year:

  • 2010

Key Words:

Author NameUniversity of Author

AMS Codes:

Abstract (2. Language): 
It is well known that in economics and finance, the data usually have “fat tail” and in this case the Normal distribution is not a good model to use. The skew normal distributions recently draw considerable attention as an alternative model. Unfortunately, the distribution of the sum of log-skew normal random variables does not have a closed form. In this work, we discuss the use of lower convex order of random variables to approximate this distribution. Further, two application of this approximate distribution are given : first to describe the final wealth of a series of payments, and second to describe the present value of a series of payments.
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  • 5
779-785
  • English

REFERENCES

References: 

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[2] J Dhaene R Kaas, M Goovaerts and M Denuit. Modern Actuarial Risk Theory. Kluwer
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