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Sensitivity of the Stability Bound for Ruin Probabilities to Claim Distributions

Author

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  • Aicha Bareche

    (University of Bejaia)

  • Mouloud Cherfaoui

    (University of Bejaia
    University of Biskra)

Abstract

We are interested in the approximation of the ruin probability of a classical risk model using the strong stability method. Particularly, we study the sensitivity of the stability bound for ruin probabilities of two risk models to approach (a simpler ideal model and a complex real one, which must be close in some sense) regarding to different large claims (heavy-tailed distributions). In a first case, we study the impact of the tail of some claim distributions on the quality of this approximation using the strong stability of a Markov chain. In a second case, we look at the sensitivity of the stability bound for the ruin probability regarding to different large claims, using two versions of the strong stability method: strong stability of a Markov chain and strong stability of a Lindley process. In both cases, comparative studies based on numerical examples and simulation results, involving different heavy-tailed distributions, are performed.

Suggested Citation

  • Aicha Bareche & Mouloud Cherfaoui, 2019. "Sensitivity of the Stability Bound for Ruin Probabilities to Claim Distributions," Methodology and Computing in Applied Probability, Springer, vol. 21(4), pages 1259-1281, December.
    • Handle: RePEc:spr:metcap:v:21:y:2019:i:4:d:10.1007_s11009-018-9675-7
    DOI: 10.1007/s11009-018-9675-7
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    References listed on IDEAS

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    Cited by:

    1. Jorge Wilson Euphasio Junior & João Vinícius França Carvalho, 2022. "Resseguro e Capital de Solvência: Atenuantes da Probabilidade de Ruína de SeguradorasReinsurance and Solvency Capital: Mitigating Insurance Companies’ Ruin Probability," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(1), pages 200191-2001.

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