Journal article
On the time value of ruin
North American actuarial journal, Vol.2(1), pp.48-72
1998
DOI: 10.1080/10920277.1998.10595671
Abstract
Abstract This paper studies the joint distribution of the time of ruin, the surplus immediately before ruin, and the deficit at ruin. The time of ruin is analyzed in terms of its Laplace transforms, which can naturally be interpreted as discounting. Hence the classical risk theory model is generalized by discounting with respect to the time of ruin. We show how to calculate an expected discounted penalty, which is due at ruin and may depend on the deficit at ruin and on the surplus immediately before ruin. The expected discounted penalty, considered as a function of the initial surplus, satisfies a certain renewal equation, which has a probabilistic interpretation. Explicit answers are obtained for zero initial surplus, very large initial surplus, and arbitrary initial surplus if the claim amount distribution is exponential or a mixture of exponentials. We generalize Dickson’s formula, which expresses the joint distribution of the surplus immediately prior to and at ruin in terms of the probability of ult...
Details
- Title: Subtitle
- On the time value of ruin
- Creators
- Hans U GerberElias S.W Shiu
- Resource Type
- Journal article
- Publication Details
- North American actuarial journal, Vol.2(1), pp.48-72
- DOI
- 10.1080/10920277.1998.10595671
- ISSN
- 1092-0277
- eISSN
- 2325-0453
- Language
- English
- Date published
- 1998
- Academic Unit
- Statistics and Actuarial Science
- Record Identifier
- 9983985865302771
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