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Calculating ruin probabilities via product integration

Author

Listed:
  • Colin M. Ramsay

    ( Facultad de Ciencias Económicas y Empresariales. Universidad Complutense de Madrid.)

  • Miguel Arturo Usábel Rodrigo

    ( Facultad de Ciencias Económicas y Empresariales. Universidad Complutense de Madrid.)

Abstract

When claims in the compound Poisson risk model are from a heavy-tailed distribution (such as the Pareto or the lognormal), traditional techniques used to compute the probability of ultimate ruin converge slowly to desired probabilities. Thus, faster and more accurate roethods are needed. Product integration can be used in such situations to yield fast and accurate estimates of ruin probabilities because it uses quadrature weights that are suited to the underlying distribution. Tables of ruin probabilities for the Pareto and lognormal distributions are provided.

Suggested Citation

  • Colin M. Ramsay & Miguel Arturo Usábel Rodrigo, 1997. "Calculating ruin probabilities via product integration," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 97-15, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    • Handle: RePEc:ucm:doctra:97-15
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    File URL: https://eprints.ucm.es/id/eprint/27013/1/9715.pdf
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    Cited by:

    1. Emilio Gómez-Déniz & José María Sarabia & Enrique Calderín-Ojeda, 2019. "Ruin Probability Functions and Severity of Ruin as a Statistical Decision Problem," Risks, MDPI, vol. 7(2), pages 1-16, June.

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