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Estimating the Probability of Ruin for Variable Premiums by Simulation

Published online by Cambridge University Press:  29 August 2014

Frédéric Michaud
Frédéric Michaud*
Affiliation:
University of Lausanne, Switzerland
*
École des HEC, Université de Lausanne, CH-1015 Lausanne. Switzerland
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Abstract

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There is a duality between the surplus process of classical risk theory and the single-server queue. It follows that the probability of ruin can be retrieved from a single sample path of the waiting time process of the single-server queue. In this paper, premiums are allowed to vary. It has been shown that the stationary distribution of a corresponding storage process is equal to the survival probability (with variable premiums). Thus by simulation of the corresponding storage process, the probability of ruin can be obtained. The special cases where the surplus earns interest and the premiums are charged by layers are considered and illustrated numerically.

Keywords

Risk theoryProbability of ruinVariable premiumsInterestPremiums by layersSimulation
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 26 , Issue 1 , May 1996 , pp. 93 - 105
Copyright
Copyright © International Actuarial Association 1996

References

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