Advances in Applied Probability

The time to ruin for a class of Markov additive risk process with two-sided jumps

Martin Jacobsen

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Abstract

We consider risk processes that locally behave like Brownian motion with some drift and variance, these both depending on an underlying Markov chain that is also used to generate the claims arrival process. Thus, claims arrive according to a renewal process with waiting times of phase type. Positive claims (downward jumps) are always possible but negative claims (upward jumps) are also allowed. The claims are assumed to form an independent, identically distributed sequence, independent of everything else. As main results, the joint Laplace transform of the time to ruin and the undershoot at ruin, as well as the probability of ruin, are explicitly determined under the assumption that the Laplace transform of the positive claims is a rational function. Both the joint Laplace transform and the ruin probability are decomposed according to the type of ruin: ruin by jump or ruin by continuity. The methods used involve finding certain martingales by first finding partial eigenfunctions for the generator of the Markov process composed of the risk process and the underlying Markov chain. We also use certain results from complex function theory as important tools.

Article information

Source
Adv. in Appl. Probab. Volume 37, Number 4 (2005), 963-992.

Dates
First available in Project Euclid: 14 December 2005

Permanent link to this document
http://projecteuclid.org/euclid.aap/1134587749

Digital Object Identifier
doi:10.1239/aap/1134587749

Mathematical Reviews number (MathSciNet)
MR2193992

Zentralblatt MATH identifier
1100.60021

Subjects
Primary: 60G40: Stopping times; optimal stopping problems; gambling theory [See also 62L15, 91A60] 60J25: Continuous-time Markov processes on general state spaces 60K15: Markov renewal processes, semi-Markov processes
Secondary: 60G44: Martingales with continuous parameter 60J35: Transition functions, generators and resolvents [See also 47D03, 47D07] 60J60: Diffusion processes [See also 58J65]

Keywords
Probability of ruin time to ruin undershoot passage time martingale optional sampling additive process Rouché's theorem

Citation

Jacobsen, Martin. The time to ruin for a class of Markov additive risk process with two-sided jumps. Adv. in Appl. Probab. 37 (2005), no. 4, 963--992. doi:10.1239/aap/1134587749. http://projecteuclid.org/euclid.aap/1134587749.


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