Abstract
This paper is concerned with regime-switching insurance risk models. The regime-switching is modeled
by a continuous-time Markov chain. Owing to various modeling considerations, the state space is
likely to be very large. A two-time-scale formulation is used to reduce the complexity. Under simple
conditions, limits of ultimate survival probabilities and ultimate ruin probabilities are obtained. These
results reveal that, for example, as a decision maker, one may ignore the detailed variations, and use
the limit ultimate ruin probabilities to approximate that of the actual ones. Moreover, the differences
of the original and limit ruin probabilities are examined. Error bounds are developed.
by a continuous-time Markov chain. Owing to various modeling considerations, the state space is
likely to be very large. A two-time-scale formulation is used to reduce the complexity. Under simple
conditions, limits of ultimate survival probabilities and ultimate ruin probabilities are obtained. These
results reveal that, for example, as a decision maker, one may ignore the detailed variations, and use
the limit ultimate ruin probabilities to approximate that of the actual ones. Moreover, the differences
of the original and limit ruin probabilities are examined. Error bounds are developed.
| Original language | English |
|---|---|
| Pages (from-to) | 111-127 |
| Journal | Scandinavian Actuarial Journal |
| Volume | 2006 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2006 |
| Externally published | Yes |