On finite-time ruin probabilities for classical risk models

Claude Lefèvre and Stéphane Loisel

Scandinavian Actuarial Journal, 2008, vol. 2008, issue 1, 41-60

Abstract: This paper examines the problem of ruin in the classical compound binomial and compound Poisson risk models. Our primary purpose is to extend to those models an exact formula derived by Picard & Lefèvre (1997) for the probability of (non-)ruin within finite time. First, a standard method based on the ballot theorem and an argument of Seal-type provides an initial (known) formula for that probability. Then, a concept of pseudo-distributions for the cumulated claim amounts, combined with some simple implications of the ballot theorem, leads to the desired formula. Two expressions for the (non-)ruin probability over an infinite horizon are also deduced as corollaries. Finally, an illustration within the framework of Solvency II is briefly presented.

Date: 2008
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DOI: 10.1080/03461230701766882

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