Rehoboth Business Center

Posts Tagged ‘Ruin Probability’

For this reason one often singles out the latter quantity in the notation further ruin time by writing. More specifically, the survival or Nora ruin probability in finale time will be defined and denoted when we consider a finite horizon. The survival probability over an infinite time horizon is defined by the quantity.

Alternative notations that are in constant use refer to the ruin probabilities which axe defined by the equalities. Each year the insurer of a portfolio has to negotiate a reinsurance contract. While an optimal strategy will depend on, the insurer has to apply the contract at the beginning of the year. Simultaneously, the future policies of the reinsurance companies have to be taken into account.

The resulting problem is hard to solve. In one approximation procedure, the premium and the reinsurance treaty is fixed for the whole future and then the optimal reinsurance is chosen; see, for instance, Dickson and Waters (1997). Then this new reinsurance treaty is chosen as input and the procedure is repeated. To get rid of the dependence on the initial capital, an alternative approach is to consider the adjustment coefficient. The adjustment coefficient is some sort of measure of risk. Maximizing the adjustment coefficient is in some sense minimizing the risk for large initial capitals. This optimization procedure was, for instance, considered in Waters (1983).