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An Insurance Risk Model with Parisian Implementation Delays

Author

Listed:
  • David Landriault

    (University of Waterloo)

  • Jean-François Renaud

    (Université du Québec à Montréal (UQAM))

  • Xiaowen Zhou

    (Concordia University)

Abstract

We consider a similar variant of the event ruin for a Lévy insurance risk process as in Czarna and Palmowski (J Appl Probab 48(4):984–1002, 2011) and Loeffen et al. (to appear, 2011) when the surplus process is allowed to spend time under a pre-specified default level before ruin is recognized. In these two articles, the ruin probability is examined when deterministic implementation delays are allowed. In this paper, we propose to capitalize on the idea of randomization and thus assume these delays are of a mixed Erlang nature. Together with the analytical interest of this problem, we will show through the development of new methodological tools that these stochastic delays lead to more explicit and computable results for various ruin-related quantities than their deterministic counterparts. Using the modern language of scale functions, we study the Laplace transform of this so-called Parisian time to ruin in an insurance risk model driven by a spectrally negative Lévy process of bounded variation. In the process, a generalization of the two-sided exit problem for this class of processes is further obtained.

Suggested Citation

  • David Landriault & Jean-François Renaud & Xiaowen Zhou, 2014. "An Insurance Risk Model with Parisian Implementation Delays," Methodology and Computing in Applied Probability, Springer, vol. 16(3), pages 583-607, September.
    • Handle: RePEc:spr:metcap:v:16:y:2014:i:3:d:10.1007_s11009-012-9317-4
    DOI: 10.1007/s11009-012-9317-4
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    References listed on IDEAS

    as
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