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A Sarmanov family with beta and gamma marginal distributions: an application to the Bayes premium in a collective risk model

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Abstract

In this paper we firstly develop a Sarmanov–Lee bivariate family of distributions with the beta and gamma as marginal distributions. We obtain the linear correlation coefficient showing that, although it is not a strong family of correlation, it can be greater than the value of this coefficient in the Farlie–Gumbel–Morgenstern family. We also determine other measures for this family: the coefficient of median concordance and the relative entropy, which are analyzed by comparison with the case of independence. Secondly, we consider the problem of premium calculation in a Poisson–Lindley and exponential collective risk model, where the Sarmanov–Lee family is used as a structure function. We determine the collective and Bayes premiums whose values are analyzed when independence and dependence between the risk profiles are considered, obtaining that notable variations in premiums values are obtained even when low levels of correlation are considered.

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Authors and Affiliations

  1. Department of Quantitative Methods, Faculty of Economics, University of Granada, Campus de Cartuja s/n, Granada, Spain

    Agustín Hernández-Bastida & M. Pilar Fernández-Sánchez

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  1. Agustín Hernández-Bastida
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  2. M. Pilar Fernández-Sánchez
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Correspondence to Agustín Hernández-Bastida.

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Hernández-Bastida, A., Fernández-Sánchez, M.P. A Sarmanov family with beta and gamma marginal distributions: an application to the Bayes premium in a collective risk model. Stat Methods Appl 21, 391–409 (2012). https://doi.org/10.1007/s10260-012-0194-3

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