The finite-time ruin probability under the compound binomial risk model (Q362055)

The authors study the compound binomial ruin model. It is a discrete-time analog of the classical compound Poisson model in risk theory where initial surplus, premiums and claims are integer valued. The model can be used as an approximation of the continuous-time compound Poisson model. The key result is the inversion of the generating function with the discount factor as argument when the inverse of the generating function with the solution of Lundberg's equation as argument is known. The result is used to derive the distribution of the first hitting time for the surplus process. Also, the probability function of the time to ruin is obtained and the duration of the time when the surplus is negative is deduced. The paper contains several examples where different claim size distributions are considered.