Premium
Ruin probabilities in models of resource management and insurance: A synthesis
Author(s) -
Bhattacharya Rabi,
Majumdar Mukul
Publication year - 2015
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12052
Subject(s) - mathematical economics , economics , stock (firearms) , markov chain , econometrics , consumption (sociology) , markov process , resource (disambiguation) , mathematics , computer science , statistics , engineering , sociology , mechanical engineering , computer network , social science
This paper synthesizes and contributes to the literature on ruin probabilities in two different contexts. First it explores a Markov (Lindley–Spitzer) process arising in a model of sustainable consumption of a renewable resource under uncertainty. The focus is on the rate of convergence of the stock process, particularly in the heavy‐tailed case. Next, it turns to the characterization of the ruin probability in the Sparre Andersen model of insurance. Both the heavy‐ and light‐tailed cases are investigated. Finally, some remarks on the mathematical connections between the two models are made.