Numerical evaluation of continuous time ruin probabilities for a portfolio with credibility updated premiums

Afonso, Lourdes B.; Reis, Alfredo. D. Egídio dos; Waters, Howard R.

http://hdl.handle.net/10400.5/24467

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Authors

Afonso, Lourdes B.

Reis, Alfredo. D. Egídio dos

Waters, Howard R.

Abstract(s)

The probability of ruin in continuous and finite time is numerically evaluated in a classical risk process where the premium can be updated according to credibility models and therefore change from year to year. A major consideration in the development of this approach is that it should be easily applicable to large portfolios. Our method uses as a first tool the model developed by Afonso et al. (2009), which is quite flexible and allows premiums to change annually. We extend that model by introducing a credibility approach to experience rating. We consider a portfolio of risks which satisfy the assumptions of the B¨uhlmann (1967, 1969) or B¨uhlmann and Straub (1970) credibility models. We compute finite time ruin probabilities for different scenarios and compare with those when a fixed premium is considered.

Keywords

Probability of Ruin Finite Time Ruin Probabilit Credibility Premiums Buhlmann’s Model Buhlmann-Straub’s Model Large Portfolios Numerical Evaluation

URI

http://hdl.handle.net/10400.5/24467

Citation

Afonso, Lourdes B., Alfredo D. Egídio Dos Reis and Howard R. Waters. (2010). "Numerical evaluation of continuous time ruin probabilities for a portfolio with credibility updated premiums." ASTIN Bulletin: The Journal of the IAA; 40.(1): pp. 399-414.