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Gerber-Shiu theory for discrete risk processes in a regime switching environment

Author

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  • Palmowski, Zbigniew
  • Ramsden, Lewis
  • Papaioannou, Apostolos D.

Abstract

In this paper we develop the Gerber-Shiu theory for the classic and dual discrete risk processes in a Markovian (regime switching) environment. In particular, by expressing the Gerber-Shiu function in terms of potential measures of an upward (downward) skip-free discrete-time and discrete-space Markov Additive Process (MAP), we derive closed form expressions for the Gerber-Shiu function in terms of the so-called (discrete) Wv and Zv scale matrices, which were introduced in [27]. We show that the discrete scale matrices allow for a unified approach for identifying the Gerber-Shiu function as well as the value function of the associated constant dividend barrier problems.

Suggested Citation

  • Palmowski, Zbigniew & Ramsden, Lewis & Papaioannou, Apostolos D., 2024. "Gerber-Shiu theory for discrete risk processes in a regime switching environment," Applied Mathematics and Computation, Elsevier, vol. 467(C).
    • Handle: RePEc:eee:apmaco:v:467:y:2024:i:c:s0096300323006604
    DOI: 10.1016/j.amc.2023.128491
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