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Markov-modulated diffusion risk models |
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| Authors: | Nicole Bäuerle Mirko Kötter |
| Institution: | 1. Institute for Stochastics , University of Karlsruhe , D-76128, Karlsruhe, Germany baeuerle@stoch.uni-karlsruhe.de;3. Institute for Mathematical Stochastics , University of Hannover , D-30167, Hannover, Germany |
| Abstract: | In this paper we consider Markov-modulated diffusion risk reserve processes. Using diffusion approximation we show the relation to classical Markov-modulated risk reserve processes. In particular we derive a representation for the adjustment coefficient and prove some comparison results. Among others we show that increasing the volatility of the diffusion increases the probability of ruin. |
| Keywords: | Ruin probability Adjustment coefficient Diffusion approximation Stochastic orderings |