The density of the time of ruin in the classical risk model with a constant dividend barrier

Shuanming Li and Yi Lu

Annals of Actuarial Science, 2014, vol. 8, issue 1, 63-78

Abstract: In this paper, we investigate the density function of the time of ruin in the classical risk model with a constant dividend barrier. When claims are exponentially distributed, we derive explicit expressions for the density function of the time of ruin and its decompositions: the density of the time of ruin without dividend payments and the density of the time of ruin with dividend payments. These densities are obtained based on their Laplace transforms, and expressed in terms of some special functions which are computationally tractable. The Laplace transforms are being inverted using a magnificent tool, the Lagrange inverse formula, developed in Dickson and Willmot (2005). Several numerical examples are given to illustrate our results.

Date: 2014
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