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Ruin probabilities in models of resource management and insurance: A synthesis

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  • Rabi Bhattacharya
  • Mukul Majumdar

Abstract

type="main" xml:lang="en"> This paper synthesizes and contributes to the literature on ruin probabilities in two different contexts. First it explores a Markov (Lindley–Spitzer) process arising in a model of sustainable consumption of a renewable resource under uncertainty. The focus is on the rate of convergence of the stock process, particularly in the heavy-tailed case. Next, it turns to the characterization of the ruin probability in the Sparre Andersen model of insurance. Both the heavy- and light-tailed cases are investigated. Finally, some remarks on the mathematical connections between the two models are made.

Suggested Citation

  • Rabi Bhattacharya & Mukul Majumdar, 2015. "Ruin probabilities in models of resource management and insurance: A synthesis," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(1), pages 59-74, March.
  • Handle: RePEc:bla:ijethy:v:11:y:2015:i:1:p:59-74
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