Ruin theory with risk proportional to free reserve and securitization

T. Siegl; R.~F. Tichy

doi:10.1016/S0167-6687(99)00042-6

Ruin theory with risk proportional to free reserve and securitization

T. Siegl, R.~F. Tichy

Institute of Analysis and Number Theory (5010)

Research output: Contribution to journal › Article › peer-review

Abstract

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 language	English
Pages (from-to)	59-73
Number of pages	15
Journal	Insurance / Mathematics & economics
Volume	26
Issue number	1
DOIs	https://doi.org/10.1016/S0167-6687(99)00042-6
Publication status	Published - 2000

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10.1016/S0167-6687(99)00042-6

Cite this

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title = "Ruin theory with risk proportional to free reserve and securitization",

abstract = "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.",

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