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Ruin probabilities under general investments and heavy-tailed claims

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  • Henrik Hult
  • Filip Lindskog

Abstract

In this paper we study the asymptotic decay of finite time ruin probabilities for an insurance company that faces heavy-tailed claims, uses predictable investment strategies and makes investments in risky assets whose prices evolve according to quite general semimartingales. We show that the ruin problem corresponds to determining hitting probabilities for the solution to a randomly perturbed stochastic integral equation. We derive a large deviation result for the hitting probabilities that holds uniformly over a family of semimartingales and show that this result gives the asymptotic decay of finite time ruin probabilities under arbitrary investment strategies, including optimal investment strategies.

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  • Henrik Hult & Filip Lindskog, 2008. "Ruin probabilities under general investments and heavy-tailed claims," Papers 0809.4372, arXiv.org.
    • Handle: RePEc:arx:papers:0809.4372
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    References listed on IDEAS

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    1. Leif Andersen & Vladimir Piterbarg, 2007. "Moment explosions in stochastic volatility models," Finance and Stochastics, Springer, vol. 11(1), pages 29-50, January.
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