Inverse Problems under Sarmanov dependence structure

Authors Krishanu Maulik, Moumanti Podder

Publication date 18 April 2016

Abstract: Consider a sequence

(X_{i}, Y_{i})

of independent and identically distributed random vectors, with joint distribution bivariate Sarmanov. This is a natural set-up for discrete time financial risk models with insurance risks. Of particular interest are the infinite time ruin probabilities

P l e f t [s u p_{n g e q 1} s u m_{i = 1}^{n} X_{i} p r o d_{j = 1}^{i} Y_{j} > x i g h t]

. When the

Y_{i}

's are assumed to have lighter tails than the

X_{i}

's, we investigate sufficient conditions that ensure each

X_{i}

has a regularly varying tail, given that the ruin probability is regularly varying. This is an inverse problem to the more traditional analysis of the ruin probabilities based on the tails of the

X_{i}

's. We impose moment-conditions as well as non-vanishing Mellin transform assumptions on the

Y_{i}

's in order to achieve the desired results. But our analysis departs from the more conventional assumption of independence between the sequences

X_{i}

and

Y_{i}

, instead assuming each

(X_{i}, Y_{i})

to be jointly distributed as bivariate Sarmanov, a fairly broad class of bivariate distributions.

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