Risk Theory with the Generalized Inverse Gaussian Lévy Process

Abstract

Dufresne et al. (1991) introduced a general risk model defined as the limit of compound Poisson processes. Such model is either a compound Poisson process itself or a strictly increasing Lévy process. Their construction is based on a non-negative non-increasing function Q that governs the jumps of the process. This function, it turns out, is the tail of the Lévy measure of the process. We discuss an illustration of their model using a generalized Inverse Gaussian (GIG) Lévy process. This increasing Lévy process has the gamma and the inverse Gaussian process as particular cases. Although mathematically more complex, the GIG Lévy process keeps some of the nice properties of the simpler gamma process.