The discrete stationary renewal risk model and the Gerber-Shiu discounted penalty function (Q704410)

The paper considers a generalization of the discrete renewal risk model, the discrete stationary or discrete equilibrium renewal risk model. The main result of the paper is that it relates the Gerber-Shiu discounted penalty functions in the ordinary and the equilibrium discrete renewal risk models. The discount free model is also considered. Close attention is also paid to the defective joint cumulative distribution function of the surplus prior to ruin and the deficit at ruin. An important special case of the presented model is the compound binomial model which is also considered. More specifically, it is demonstrated how the difference approach suits for use in this context, and it is employed by the authors to obtain a discrete defective renewal equation for the Gerber-Shiu discounted penalty function. Although the presented approach has some similarities with the classical continuous analogue Poisson model, it also presents, as the authors state, some technical differences. Moreover, the presented approach involves differencing and it may also be employed in discrete renewal risk models with interclaim time distributions of discrete phase-type. In such situations repeated differencing is needed and in this context, the presented approach presents qualitative similarities with other proposed approaches, although it focuses on the compound binomial model.