Direct Derivation of Finite-Time Ruin Probabilities in the Discrete Risk Model with Exponential or Geometric Claims |
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Authors: | Wai-Sum Chan FSA PhD Lianzeng Zhang PhD |
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Institution: | 1. Department of Finance , Chinese University of Hong Kong , Shatin, N.T , Hong Kong , P. R. China;2. Department of Risk Management and Insurance , Nankai University , Tianjin 300071 , P. R. China |
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Abstract: | Abstract Growing research interest has been shown in finite-time ruin probabilities for discrete risk processes, even though the literature is not as extensive as for continuous-time models. The general approach is through the so-called Gerber-Shiu discounted penalty function, obtained for large families of claim severities and discrete risk models. This paper proposes another approach to deriving recursive and explicit formulas for finite-time ruin probabilities with exponential or geometric claim severities. The proposed method, as compared to the general Gerber-Shiu approach, is able to provide simpler derivation and straightforward expressions for these two special families of claims. |
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