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A link between wave governed random motions and ruin processes

  • Mazza, Christian
  • Rulliere, Didier

This article establishes a link between hitting times associated with the risk process (time of ruin) and wave governed random motions, which are widely used in physics. Concerning risk theory, another link holds between processes corresponding to models called positive and negative risk sums. Some classical results appear to be strongly interconnected. An original algorithm is proposed for computing finite-time ruin probabilities in renewal non-Poissonian risk model with exponential claims. Concerning wave-governed random motions, we analyze the distribution of the maxima of the processes. New bounds are directly derived from risk theory and appear to be more accurate than the ones proposed recently in the probabilistic literature. Finally, we propose applications of these notions in finance.

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Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

Volume (Year): 35 (2004)
Issue (Month): 2 (October)
Pages: 205-222

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Handle: RePEc:eee:insuma:v:35:y:2004:i:2:p:205-222
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  1. Rulliere, Didier & Loisel, Stephane, 2004. "Another look at the Picard-Lefevre formula for finite-time ruin probabilities," Insurance: Mathematics and Economics, Elsevier, vol. 35(2), pages 187-203, October.
  2. Foong, S. K. & Kanno, S., 1994. "Properties of the telegrapher's random process with or without a trap," Stochastic Processes and their Applications, Elsevier, vol. 53(1), pages 147-173, September.
  3. Orsingher, Enzo, 1990. "Probability law, flow function, maximum distribution of wave-governed random motions and their connections with Kirchoff's laws," Stochastic Processes and their Applications, Elsevier, vol. 34(1), pages 49-66, February.
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