Ruin probabilities in models of resource management and insurance: A synthesis. (March 2015)

• Record Type: Journal Article
• Authors: Bhattacharya, Rabi; Majumdar, Mukul
• Is Part Of: International journal of economic theory. Volume 11:Number 1(2015:Mar.)
• Page Start: 59
• Page End: 74
• Publication Date: 2015-03
• Subjects: Economics -- Periodicals; 330.01
• DOI: 10.1111/ijet.12052
• Languages: English
• ISSNs: 1742-7355

Abstract

<abstract abstract-type="main" xml:lang="en"> <title>Abstract</title> <sec id="ijet12052-sec-0001" sec-type="section"> <p>This paper synthesizes and contributes to the literature on ruin probabilities in two different contexts. First it explores a Markov (Lindley–Spitzer) process arising in a model of sustainable consumption of a renewable resource under uncertainty. The focus is on the rate of convergence of the stock process, particularly in the heavy‐tailed case. Next, it turns to the characterization of the ruin probability in the Sparre Andersen model of insurance. Both the heavy‐ and light‐tailed cases are investigated. Finally, some remarks on the mathematical connections between the two models are made.</p> </sec> </abstract>