Insurance Models for Industry

2012/2013

List 5
1. Show that if N has Poisson distribution with parameter , the distribution of
Z=

approaches a N (0, 1) distribution as .

2. Consider the family of negative binomial distributions with parameters r and p. Let r
and p 1 such that r(1 p) = remains constant. Show that the limit obtained is the
Poisson distribution with parameter .
3. Suppose the d.f. of S is G(x; , ) (Gamma with parameters and ). Use the m.g.f. to show
that
ES k =

( + 1)( + 2)...( + k 1)
, k = 1, 2, 3, ...
k

4. Suppose that S has a compound Poisson distribution with = 12 and claim amounts that
are uniformly distributed between 0 and 1. Approximate P (S < 10) using
a) a normal approximation
b) a translated gamma approximation.
5. Let us assume S has compound Poisson distribution with Poisson parameter = 16 and
individual claim amount X such that P (X = 1) = 1. Compare the distribution of S with
a) a normal approximation
b) a translated gamma approximation.
Fill the following table

Exact d.f.

Approximation

Approximation

translated gamma d.f.

normal d.f.

5
10
15
6. a) For a given , determine and x0 so that H(x; , , x0 ) has mean 0 and variance 1.

b) What is the limit of H(x; , , ), as ?

7. Let us assume the claim amounts in collective risk model have distribution with following
density function
f (x) = 0.5x2 exp(x), x > 0.
Moreover we assume the number of claim amounts has a Poisson distribution with parameter
= 12.
We approximate the aggregate claim S by using the translated gamma distribution H(x; , , x0 ).
The , and x0 parameters we determine by comparing the first three central moments of
the translated gamma distribution and distribution of S. Determine the parameters.