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Two-Sided Bounds for Ruin Probabilities when the Adjustment Coefficient does not Exist

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  • Jun Cai
  • José Garrido

Abstract

In this paper, we derive two-sided bounds for the ruin probability in the compound Poisson risk model when the adjustment coefficient of the individual claim size distribution does not exist. These bounds also apply directly to the tails of compound geometric distributions. The upper bound is tighter than that of Dickson (1994). The corresponding lower bound, which holds under the same conditions, is tighter than that of De Vylder and Goovaerts (1984). Even when the adjustment coefficient exists, the upper bound is, in some cases, tighter than Lundberg's bound. These bounds are applicable for any positive distribution function with a finite mean. Examples are given and numerical comparisons with asymptotic formulae for the ruin probability are also considered.

Suggested Citation

  • Jun Cai & José Garrido, 1999. "Two-Sided Bounds for Ruin Probabilities when the Adjustment Coefficient does not Exist," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 1999(1), pages 80-92.
  • Handle: RePEc:taf:sactxx:v:1999:y:1999:i:1:p:80-92
    DOI: 10.1080/03461230050131894
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