Approximating the Finite-Time Ruin Probability under Interest Force

Research output: Working paperDiscussion paperOther research output

Abstract

We present an algorithm to determine both a lower and an upper bound for the finite-time probability of ruin for a risk process with constant interest force. We split the time horizon into smaller intervals of equal length and consider the probability of ruin in case premium income for a time interval is received at the beginning (resp. end) of that interval, which yields a lower (resp. upper) bound.For both bounds we present a renewal equation which depends on the distribution of the present value of the aggregate claim amount in a time interval.This distribution is determined through a generalization of Panjer's (1981) recursive method.
Original languageEnglish
Place of PublicationTilburg
PublisherOperations research
Number of pages18
Volume2000-111
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-111

Keywords

  • interest rate
  • probability

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