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Estimating the Probability of Ruin for Variable Premiums by Simulation

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  • Michaud, Frédéric

Abstract

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.

Suggested Citation

  • Michaud, Frédéric, 1996. "Estimating the Probability of Ruin for Variable Premiums by Simulation," ASTIN Bulletin, Cambridge University Press, vol. 26(1), pages 93-105, May.
    • Handle: RePEc:cup:astinb:v:26:y:1996:i:01:p:93-105_00
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    Cited by:

    1. Jasiulewicz, Helena, 2001. "Probability of ruin with variable premium rate in a Markovian environment," Insurance: Mathematics and Economics, Elsevier, vol. 29(2), pages 291-296, October.
    2. Mehmet Akif Yazici & Nail Akar, 2017. "The finite/infinite horizon ruin problem with multi-threshold premiums: a Markov fluid queue approach," Annals of Operations Research, Springer, vol. 252(1), pages 85-99, May.
    3. Cardoso, Rui M.R. & Waters, Howard R., 2005. "Calculation of finite time ruin probabilities for some risk models," Insurance: Mathematics and Economics, Elsevier, vol. 37(2), pages 197-215, October.
    4. Paulsen, Jostein, 1998. "Ruin theory with compounding assets -- a survey," Insurance: Mathematics and Economics, Elsevier, vol. 22(1), pages 3-16, May.

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