The finite-time ruin probability of a discrete-time risk model with GARCH discounted factors and dependent risks

Rongfei Liu, Dingcheng Wang and Fenglong Guo

Communications in Statistics - Theory and Methods, 2018, vol. 47, issue 17, 4170-4186

Abstract: The finite-time ruin probability of a discrete-time risk model with dependent stochastic discount factors and dependent insurance and financial risks is investigated in this paper. Assume that the stochastic discount factors follow a GARCH process and the one-period insurance and financial risks form a sequence of independent and identically distributed random pairs, which are the copies of a random pair with a bivariate Sarmanov dependent distribution. When the common distribution of claim-sizes is heavy-tailed, we establish an asymptotic estimate for the finite-time ruin probability. Applying the result to a special case, we also get conservative asymptotic bounds. A numerical simulation is given at the end of the paper.

Date: 2018
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DOI: 10.1080/03610926.2017.1371753

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