Compound Poisson approximation of individual risk models

Individual risk models' approximation by Compound Poisson approximation is discussed. Three principles are presented, and the optimal choice of Poisson parameters under the three principles is discussed. It is proved that the individual risk model is also a compound binomial model; And formulas on the calculation of the optimal parameters are given. For two distributions, Exponential and Pareto, calculating results are given.EI05609-6173