A revisit to ruin probabilities in the presence of heavy-tailed insurance and financial risks

Yiqing Chen and Zhongyi Yuan

Insurance: Mathematics and Economics, 2017, vol. 73, issue C, 75-81

Abstract: Recently, Sun and Wei (2014) studied the finite-time ruin probability under a discrete-time insurance risk model, in which the one-period insurance and financial risks are assumed to be independent and identically distributed copies of a random pair (X,Y). For the heavy-tailed case, under a restriction on the dependence structure of (X,Y), they established an asymptotic formula for the finite-time ruin probability. In this paper we make an effort to remove this restriction as it excludes the cases with asymptotically dependent X and Y. We also extend the study to the infinite-time ruin probability. Employing a multivariate regular variation framework, we simplify the formula so that it shows in a transparent way how the ruin probabilities are affected by the tail dependence of (X,Y).

Keywords: Ruin probability; Heavy-tailed distributions; Insurance and financial risks; Asymptotics; Tail dependence; Regular variation (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:73:y:2017:i:c:p:75-81

DOI: 10.1016/j.insmatheco.2017.01.005

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