What is the best approximation of ruin probability in infinite time?
Volume 32 / 2005
Applicationes Mathematicae 32 (2005), 155-176 MSC: 62P05, 60G55. DOI: 10.4064/am32-2-4
We compare 12 different approximations of ruin probability in infinite time studying typical light- and heavy-tailed claim size distributions, namely exponential, mixture of exponentials, gamma, lognormal, Weibull, loggamma, Pareto and Burr. We show that approximation based on the Pollaczek–Khinchin formula gives most accurate results, in fact it can be chosen as a reference method. We also introduce a promising modification to the De Vylder approximation.