Ruin theory with risk proportional to free reserve and securitization

T. Siegl, R.~F. Tichy

Research output: Contribution to journalArticlepeer-review


A model is proposed for addressing investment risk of the free reserve, in the form of credit or currency risk. This risk is expressed by a constant factor α that represents the recovery rate of a bond or a devaluation factor. Securitization (e.g. with a CAT-bond like product) yields a constant amount K upon such an event. The model equation is an integro-differential equation with deviating arguments. We compute the analytical solution for the probability of survival and also show results of simulations using quasi-Monte Carlo methods.
Original languageEnglish
Pages (from-to)59-73
Number of pages15
JournalInsurance / Mathematics & economics
Issue number1
Publication statusPublished - 2000

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