Minimizing Upper Bound of Ruin Probability Under Discrete Risk Model with Markov Chain Interest Rate

Xu Lin, Zhu Dongjin and Zhou Yanru

Communications in Statistics - Theory and Methods, 2015, vol. 44, issue 4, 810-822

Abstract: This article focuses on minimal upper bound of ruin probability for a discrete time risk model with Markov chain interest rate and stochastic investment return. The interest rate of bond market is assumed to be a stationary Markov chain, and the return process of a stock market can be negative. This article presents two kinds of methods for minimizing the upper bound of ruin probability. One method relies on recursive equations for finite time ruin probabilities and inductive approach, the other one depends on martingale approach. Numerical examples show that the martingale approach is better than the inductive one.

Date: 2015
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DOI: 10.1080/03610926.2013.771748

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