Ruin Probability for Stochastic Flows of Financial Contract under Phase-Type Distribution

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ID: 110412
2020
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Abstract
This paper examines the impact of the parameters of the distribution of the time at which a bank’s client defaults on their obligated payments, on the Lundberg adjustment coefficient, the upper and lower bounds of the ruin probability. We study the corresponding ruin probability on the assumption of (i) a phase-type distribution for the time at which default occurs and (ii) an embedding of the stochastic cash flow or the reserves of the bank to the Sparre Andersen model. The exact analytical expression for the ruin probability is not tractable under these assumptions, so Cramér Lundberg bounds types are obtained for the ruin probabilities with concomitant explicit equations for the calculation of the adjustment coefficient. To add some numerical flavour to our results, we provide some numerical illustrations.
Reference Key
adékambi2020risksruin Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Franck Adékambi;Kokou Essiomle;Adékambi, Franck;Essiomle, Kokou;
Journal risks
Year 2020
DOI
10.3390/risks8020053
URL
https://www.mdpi.com/2227-9091/8/2/53##
Keywords
stochastic cash flow sparre andersen model ruin probability phase-type distribution erlang distribution coxian distribution moment generating function

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