Ruin Probabilities and Complex Analysis

This paper considers the solution of the equations for ruin probabilities in infinite continuous time. Using the Fourier Transform and certain results from the theory of complex functions, these solutions are obtained as com- plex integrals in a form which may be evaluated numerically by means of the inverse Fourier Transform. In addition the relationship between the re- sults obtained for the continuous time cases, and those in the literature, are compared. Closed form ruin probabilities for the heavy tailed distributions: mixed exponential; Gamma (including Erlang); Lognormal; Weillbull; and Pareto, are derived as a result (or computed to any degree of accuracy, and without the use of simulations).

A Dynamic Contagion Risk Model with Recovery Features

We introduce threshold growth in the classical threshold contagion model, or equivalently a network of Cramér-Lundberg processes in which nodes have downward jumps when there is a failure of a neighboring node. Choosing the configuration model as underlying graph, we prove fluid limits for the baseline model, as well as extensions to the directed case, state-dependent interarrival times and the case of growth driven by upward jumps. We obtain explicit ruin probabilities for the nodes according to their characteristics: initial threshold and in- (and out-) degree. We then allow nodes to choose their connectivity by trading off link benefits and contagion risk. We define a rational equilibrium concept in which nodes choose their connectivity according to an expected failure probability of any given link and then impose condition that the expected failure probability coincides with the actual failure probability under the optimal connectivity. We show existence of an asymptotic equilibrium and convergence of the sequence of equilibria on the finite networks. In particular, our results show that systems with higher overall growth may have higher failure probability in equilibrium.

A three-player gambler's ruin problem: some extensions

For the expected ruin time of the classic three-player symmetric game, Sandell derived a general formula by introducing an appropriate martingale and stopping time. For the case of asymmetric game, the martingale approach is not valid to determine the ruin time. In general, the ruin probabilities for both cases, i.e. symmetric and asymmetric game and expected ruin time for asymmetric game are still awaiting to be solved for this game. The current work is also about three-player gambler’s ruin problem with some extensions as well. We provide expressions for the ruin time with (without) ties when all the players have equal (unequal) initial fortunes. Finally, the validity of asymmetric game is also tested through a Monte Carlo simulation study.

How Much We Gain by Surplus-Dependent Premiums—Asymptotic Analysis of Ruin Probability

In this paper, we generate boundary value problems for ruin probabilities of surplus-dependent premium risk processes, under a renewal case scenario, Erlang (2) claim arrivals, and a hypoexponential claims scenario, Erlang (2) claim sizes. Applying the approximation theory of solutions of linear ordinary differential equations, we derive the asymptotics of the ruin probabilities when the initial reserve tends to infinity. When considering premiums that are linearly dependent on reserves, representing, for instance, returns on risk-free investments of the insurance capital, we firstly derive explicit solutions of the ordinary differential equations under considerations, in terms of special mathematical functions and integrals, from which we can further determine their asymptotics. This allows us to recover the ruin probabilities obtained for general premiums dependent on reserves. We compare them with the asymptotics of the equivalent ruin probabilities when the premium rate is fixed over time, to measure the gain generated by this additional mechanism of binding the premium rates with the amount of reserve owned by the insurance company.