Fractional risk process in insurance

DOI10.1007/S11579-019-00244-YzbMATH Open1435.91156arXiv1808.07950OpenAlexW2963293047WikidataQ127650393 ScholiaQ127650393MaRDI QIDQ2299384FDOQ2299384

Authors: Arun Kumar, Alois Pichler, Nikolai N. Leonenko 

Publication date: 21 February 2020

Published in: Mathematics and Financial Economics (Search for Journal in Brave)

Abstract: Important models in insurance, for example the Carm{'e}r--Lundberg theory and the Sparre Andersen model, essentially rely on the Poisson process. The process is used to model arrival times of insurance claims. This paper extends the classical framework for ruin probabilities by proposing and involving the fractional Poisson process as a counting process and addresses fields of applications in insurance. The interdependence of the fractional Poisson process is an important feature of the process, which leads to initial stress of the surplus process. On the other hand we demonstrate that the average capital required to recover a company after ruin does not change when switching to the fractional Poisson regime. We finally address particular risk measures, which allow simple evaluations in an environment governed by the fractional Poisson process.

Full work available at URL: https://arxiv.org/abs/1808.07950

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zbMATH Keywords

renewal processruin probabilityconvex risk measuresrisk processlong range dependencefractional Poisson process

Mathematics Subject Classification ID

Actuarial mathematics (91G05) Fractional processes, including fractional Brownian motion (60G22) Renewal theory (60K05)

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Cited In (14)

• Time-changed Poisson processes of order \(k\)
• Large deviations for a class of tempered subordinators and their inverse processes
• Fractional Skellam processes with applications to finance
• Implied fractional hazard rates and default risk distributions
• Fractional Poisson process: long-range dependence and applications in ruin theory
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