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Recursive Methods for Computing Finite-Time Ruin Probabilities for Phase-Distributed Claim Sizes

Published online by Cambridge University Press:  29 August 2014

D.A. Stanford  and
K.J. Stroiński
D.A. Stanford
Affiliation:
Department of Statistical and Actuarial Sciences, University of Western Ontario, London, Ontario, Canada, N6A 5B7
K.J. Stroiński
Affiliation:
Department of Statistical and Actuarial Sciences, University of Western Ontario, London, Ontario, Canada, N6A 5B7
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Abstract

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Finite time ruin methods typically rely on diffusion approximations or discretization. We propose a new method by looking at the surplus process embedded at claim instants and develop a recursive scheme for calculating ruin probabilities. It is assumed that claim sizes follow a phase-type distribution. The proposed method is exact. The application of the method reveals where in the future the relative vulnerability to the company lies.

Keywords

Finite-time ruin probabilityRecursive methodsPhase-type distributionsRisk theory
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 24 , Issue 2 , November 1994 , pp. 235 - 254
Copyright
Copyright © International Actuarial Association 1994

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