Asymptotic ruin probabilities and optimal investment (Q1425485)

The authors model the risk process of an insurance company which can invest in a stock described by geometric Brownian motion. In the classical Cramér-Lundberg model without investment possibility the ruin probability of the insurance company can be bounded from above by \(e^{-\nu x}\) where \(x\geq 0\) is the initial reserve of the insurance company and \(\nu\) is the Lundberg coefficient. The authors obtain an exact analogue of the classical estimate for the ruin probability in the generalized model. A surprising result is that the trading strategy yielding the optimal asymptotic decay of the ruin probability consists in holding a fixed quantity in the risky asset, independent of the current reserve.