A review of discrete-time risk models

Abstract

In this paper, we present a review of results for discrete-time risk models, including the compound binomial risk model and some of its extensions. While most theoretical risk models use the concept of time continuity, the practical reality is discrete. For instance, recursive formulas for discrete time models can be obtained without assuming a claim severity distribution and are readily programmable in practice. Hence the models, techniques used, and results reviewed here for discrete-time risk models are of independent scientific interest. Yet, results for discrete-time risk models can give, in addition, a simpler understanding of their continuous-time analogue. For example, these results ..