Abstract
We consider a risk reserve process whose premium rate reduces from cd to cu when the reserve comes above some critical value v. In the model of Cramer-Lundberg with initial capital u ≥ 0, we obtain the probability that ruin does not occur before the first up-crossing of level v. When u < v, following H. Gerber and E. Shiu (1997), we derive the probability that starting with initial capital u ruin occurs and the severity of ruin is not bigger than v. Further we express the probability of ruin in the two step premium function model - ψ (u,v), by the last two probabilities. Our assumptions imply that the surplus process will go to infinity almost surely. This entails that the process will stay below zero only temporarily. We derive the distribution of the total duration of negative surplus and obtain its Laplace transform and mean value. As a consequence of these results, under certain conditions in the Model of Cramer-Lundberg we obtain the expected value of the severity of ruin. In the end of the paper we give examples with exponential claim sizes.
Recommended Citation
Jordanova, Pavlina
(2007).
On the Total Duration of Negative Surplus of a Risk Process with Two-step Premium Function,
Applications and Applied Mathematics: An International Journal (AAM), Vol. 2,
Iss.
2, Article 4.
Available at:
https://digitalcommons.pvamu.edu/aam/vol2/iss2/4