Ruin probabilities in models of resource management and insurance: A synthesis

Rabi Bhattacharya and Mukul Majumdar

International Journal of Economic Theory, 2015, vol. 11, issue 1, 59-74

Abstract: type="main" xml:lang="en">

This paper synthesizes and contributes to the literature on ruin probabilities in two different contexts. First it explores a Markov (Lindley–Spitzer) process arising in a model of sustainable consumption of a renewable resource under uncertainty. The focus is on the rate of convergence of the stock process, particularly in the heavy-tailed case. Next, it turns to the characterization of the ruin probability in the Sparre Andersen model of insurance. Both the heavy- and light-tailed cases are investigated. Finally, some remarks on the mathematical connections between the two models are made.

Date: 2015
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