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Finite time ruin probabilities for tempered stable insurance risk processes

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  • Griffin, Philip S.
  • Maller, Ross A.
  • Roberts, Dale

Abstract

We study the probability of ruin before time t for the family of tempered stable Lévy insurance risk processes, which includes the spectrally positive inverse Gaussian processes. Numerical approximations of the ruin time distribution are derived via the Laplace transform of the asymptotic ruin time distribution, for which we have an explicit expression. These are benchmarked against simulations based on importance sampling using stable processes. Theoretical consequences of the asymptotic formulae indicate that some care is needed in the choice of parameters to avoid exponential growth (in time) of the ruin probabilities in these models. This, in particular, applies to the inverse Gaussian process when the safety loading is less than one.

Suggested Citation

  • Griffin, Philip S. & Maller, Ross A. & Roberts, Dale, 2013. "Finite time ruin probabilities for tempered stable insurance risk processes," Insurance: Mathematics and Economics, Elsevier, vol. 53(2), pages 478-489.
    • Handle: RePEc:eee:insuma:v:53:y:2013:i:2:p:478-489
    DOI: 10.1016/j.insmatheco.2013.07.010
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    References listed on IDEAS

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    Cited by:

    1. Kalloniatis, Alexander C. & McLennan-Smith, Timothy A. & Roberts, Dale O., 2020. "Modelling distributed decision-making in Command and Control using stochastic network synchronisation," European Journal of Operational Research, Elsevier, vol. 284(2), pages 588-603.
    2. Yuguang Fan & Philip S. Griffin & Ross Maller & Alexander Szimayer & Tiandong Wang, 2017. "The Effects of Largest Claim and Excess of Loss Reinsurance on a Company’s Ruin Time and Valuation," Risks, MDPI, vol. 5(1), pages 1-27, January.

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