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Section IV

The Esscher approximation method

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Pages 34-50 | Published online: 22 Dec 2011
 

Abstract

In many cases, especially in connection with random variables, generated by sums of random variables the fr.f. or d.f. is either unknown or too complicated for practical use so even when the d.f, is completely known, some sort of approximation is needed. In such a situation very often the corresponding c.f. is rather simple. Very often the normal approximation or the asymptotic expansion derived from it gives accurate results. The properties of such approximations are well known, and exact upper limits for the errors in these approximation formulae are easily available.

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