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A two-dimensional ruin problem on the positive quadrant

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  • Avram, Florin
  • Palmowski, Zbigniew
  • Pistorius, Martijn

Abstract

In this paper we study the joint ruin problem for two insurance companies that divide between them both claims and premia in some specified proportions (modeling two branches of the same insurance company or an insurance and re-insurance company). Modeling the risk processes of the insurance companies by Cramér-Lundberg processes we obtain the Laplace transform in space of the probability that either of the insurance companies is ruined in finite time. Subsequently, for exponentially distributed claims, we derive an explicit analytical expression for this joint ruin probability by explicitly inverting this Laplace transform. We also provide a characterization of the Laplace transform of the joint ruin time.

Suggested Citation

  • Avram, Florin & Palmowski, Zbigniew & Pistorius, Martijn, 2008. "A two-dimensional ruin problem on the positive quadrant," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 227-234, February.
    • Handle: RePEc:eee:insuma:v:42:y:2008:i:1:p:227-234
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    References listed on IDEAS

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    1. Pervozvansky, A. Jr., 1998. "Equation for survival probability in a finite time interval in case of non-zero real interest force," Insurance: Mathematics and Economics, Elsevier, vol. 23(3), pages 287-295, December.
    2. Asmussen, Soren & Avram, Florin & Usabel, Miguel, 2002. "Erlangian Approximations for Finite-Horizon Ruin Probabilities," ASTIN Bulletin, Cambridge University Press, vol. 32(2), pages 267-281, November.
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    Cited by:

    1. Irmina Czarna & Zbigniew Palmowski, 2009. "De Finetti's dividend problem and impulse control for a two-dimensional insurance risk process," Papers 0906.2100, arXiv.org, revised Feb 2011.
    2. Boxma, Onno & Frostig, Esther & Perry, David & Yosef, Rami, 2017. "A state dependent reinsurance model," Insurance: Mathematics and Economics, Elsevier, vol. 74(C), pages 170-181.
    3. Anita Behme & Philipp Lukas Strietzel, 2021. "A $$2~{\times }~2$$ 2 × 2 random switching model and its dual risk model," Queueing Systems: Theory and Applications, Springer, vol. 99(1), pages 27-64, October.
    4. G. A. Delsing & M. R. H. Mandjes & P. J. C. Spreij & E. M. M. Winands, 2020. "Asymptotics and Approximations of Ruin Probabilities for Multivariate Risk Processes in a Markovian Environment," Methodology and Computing in Applied Probability, Springer, vol. 22(3), pages 927-948, September.
    5. Badila, E.S. & Boxma, O.J. & Resing, J.A.C., 2015. "Two parallel insurance lines with simultaneous arrivals and risks correlated with inter-arrival times," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 48-61.
    6. Castañer, A. & Claramunt, M.M. & Lefèvre, C., 2013. "Survival probabilities in bivariate risk models, with application to reinsurance," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 632-642.
    7. Michel Mandjes, 2022. "Multivariate M/G/1 systems with coupled input and parallel service," Queueing Systems: Theory and Applications, Springer, vol. 100(3), pages 309-311, April.
    8. Liu, Jingchen & Woo, Jae-Kyung, 2014. "Asymptotic analysis of risk quantities conditional on ruin for multidimensional heavy-tailed random walks," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 1-9.
    9. Ivanovs, Jevgenijs & Boxma, Onno, 2015. "A bivariate risk model with mutual deficit coverage," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 126-134.
    10. Peter Grandits & Maike Klein, 2020. "Ruin probability in a two-dimensional model with correlated Brownian motions," Papers 2004.13601, arXiv.org.
    11. Pablo Azcue & Nora Muler & Zbigniew Palmowski, 2016. "Optimal dividend payments for a two-dimensional insurance risk process," Papers 1603.07019, arXiv.org, revised Apr 2018.
    12. Zhang, Yuanyuan & Wang, Wensheng, 2012. "Ruin probabilities of a bidimensional risk model with investment," Statistics & Probability Letters, Elsevier, vol. 82(1), pages 130-138.
    13. Debicki, K. & Kosinski, K.M. & Mandjes, M. & Rolski, T., 2010. "Extremes of multidimensional Gaussian processes," Stochastic Processes and their Applications, Elsevier, vol. 120(12), pages 2289-2301, December.
    14. Albrecher, Hansjörg & Cheung, Eric C.K. & Liu, Haibo & Woo, Jae-Kyung, 2022. "A bivariate Laguerre expansions approach for joint ruin probabilities in a two-dimensional insurance risk process," Insurance: Mathematics and Economics, Elsevier, vol. 103(C), pages 96-118.
    15. Hamed Amini & Zhongyuan Cao & Andreea Minca & Agn`es Sulem, 2023. "Ruin Probabilities for Risk Processes in Stochastic Networks," Papers 2302.06668, arXiv.org.
    16. Gong, Lan & Badescu, Andrei L. & Cheung, Eric C.K., 2012. "Recursive methods for a multi-dimensional risk process with common shocks," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 109-120.
    17. Krzysztof Burnecki & Zbigniew Palmowski & Marek Teuerle & Aleksandra Wilkowska, 2023. "Ruin probability for the quota share model with~phase-type distributed claims," Papers 2303.07705, arXiv.org.
    18. Florin Avram & Romain Biard & Christophe Dutang & Stéphane Loisel & Landy Rabehasaina, 2014. "A survey of some recent results on Risk Theory," Post-Print hal-01616178, HAL.
    19. Hansjoerg Albrecher & Pablo Azcue & Nora Muler, 2015. "Optimal Dividend Strategies for Two Collaborating Insurance Companies," Papers 1505.03980, arXiv.org.
    20. Macci, Claudio, 2011. "Large deviations for estimators of unknown probabilities, with applications in risk theory," Statistics & Probability Letters, Elsevier, vol. 81(1), pages 16-24, January.
    21. Bäuerle, Nicole & Blatter, Anja, 2011. "Optimal control and dependence modeling of insurance portfolios with Lévy dynamics," Insurance: Mathematics and Economics, Elsevier, vol. 48(3), pages 398-405, May.

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