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Written by theoretic
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A major building block of classical risk theory is devoted to the probability of ruin; see Chapter 4. It is a global measure of the risk one encounters in a portfolio over a long time horizon. We deal with the classical small claim case and give the celebrated estimates of Cram´er and Lundberg (Sections 4.2.1 and 4.2.2).
These results basically say that ruin is very unlikely for small claim sizes. In contrast to the latter results, the large claim case yields completely different results: ruin is not unlikely; see Section 4.2.4.
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