Impact of correlation crises in risk theory: Asymptotics of finite-time ruin probabilities for heavy-tailed claim amounts when some independence and stationarity assumptions are relaxed
AbstractIn the renewal risk model, several strong hypotheses may be found too restrictive to model accurately the complex evolution of the reserves of an insurance company. In the case where claim sizes are heavy-tailed, we relax the independence and stationarity assumptions and extend some asymptotic results on finite-time ruin probabilities, to take into account possible correlation crises like the one recently bred by the sub-prime crisis: claim amounts, in general assumed to be independent, may suddenly become strongly positively dependent. The impact of dependence and non-stationarity is analyzed and several concrete examples are given.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 43 (2008)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/locate/inca/505554
Finite-time ruin probabilities Ruin theory Correlation crisis Sub-prime effect Processes with dependent increments Asymptotic behavior Non-stationarity Heavy-tailed claim size distribution;
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