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Robustness analysis and convergence of empirical finite-time ruin probabilities and estimation risk solvency margin

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Author Info
Stéphane Loisel () (SAF - EA2429 - Laboratoire de Science Actuarielle et Financière - Université Claude Bernard - Lyon I)
Christian Mazza () (Département de Mathématiques - Université de Fribourg)
Didier Rullière () (SAF - EA2429 - Laboratoire de Science Actuarielle et Financière - Université Claude Bernard - Lyon I)

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Abstract

We consider the classical risk model and carry out a sensitivity and robustness analysis of finite-time ruin probabilities. We provide algorithms to compute the related influence functions. We also prove the weak convergence of a sequence of empirical finite-time ruin probabilities starting from zero initial reserve toward a Gaussian random variable. We define the concepts of reliable finite-time ruin probability as a Value-at-Risk of the estimator of the finite-time ruin probability. To control this robust risk measure, an additional initial reserve is needed and called Estimation Risk Solvency Margin (ERSM). We apply our results to show how portfolio experience could be rewarded by cut-offs in solvency capital requirements. An application to catastrophe contamination and numerical examples are also developed.

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Paper provided by HAL in its series Post-Print with number hal-00168714_v1.

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Date of creation: Apr 2008
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Publication status: Published, Insurance Mathematics and Economics, 2008, 42, 2, 746-762
Handle: RePEc:hal:journl:hal-00168714_v1

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Related research
Keywords: Finite-time ruin probability; robustness; Solvency II; reliable ruin probability; asymptotic Normality; influence function; Estimation Risk Solvency Margin (ERSM);

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  1. Ignatov, Zvetan G. & Kaishev, Vladimir K. & Krachunov, Rossen S., 2001. "An improved finite-time ruin probability formula and its Mathematica implementation," Insurance: Mathematics and Economics, Elsevier, vol. 29(3), pages 375-386, December. [Downloadable!] (restricted)
  2. Marceau, Etienne & Rioux, Jacques, 2001. "On robustness in risk theory," Insurance: Mathematics and Economics, Elsevier, vol. 29(2), pages 167-185, October. [Downloadable!] (restricted)
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  1. Romain Biard & Stéphane Loisel & Claudio Macci & Noel Veraverbeke, 2009. "Asymptotic behavior of the finite-time expected time-integrated negative part of some risk processes and optimal reserve allocation," Working Papers hal-00372525_v2, HAL. [Downloadable!]
  2. Stéphane Loisel & Nicolas Privault, 2009. "Sensitivity analysis and density estimation for finite-time ruin probabilities," Post-Print hal-00201347_v3, HAL. [Downloadable!]
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