On the central management of risk networks

DOI10.1017/APR.2016.85MaRDI QIDQ5233165zbMATH OpenOpenAlexFDO

Authors F. Avram, Andreea Minca

Publication date 16 September 2019

Published in Advances in Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1506.08117

zbMATH Keywords

Markov additive processmatrix exponential approximationmultidimensional risk processruin probabilitySparre Andersen process

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Jump processes on discrete state spaces (60J74) Applications of queueing theory (congestion, allocation, storage, traffic, etc.) (60K30) Risk models (general) (91B05)

Abstract: We introduce a family of risk networks composed from a) several subsidiary branches $U_i(t),i=1,\mathrm{...},I$ necessary for coping with different types of risks, which must all be kept above $0$, and b) a central branch (CB) which bails out the subsidiaries whenever necessary. Ruin occurs when the central branch is ruined. We find out that with one subsidiary ($I=1$), the finite time ruin probability of the central branch may be explicitly written out in terms of the finite time ruin probability of the subsidiary, provided that the CB in the absence of subsidiary bailouts is a deterministic drift. To study other problems, like for example the optimization of dividends to the CB with one subsidiary over a barrier, it is convenient to restrict to the case of phase-type claims to the subsidiary, and study the Markovian phase process at the moments when the CB process reaches new minima. The resulting structure is quite close to that of the phase of a PH/G/1 queue at the moments when it reaches new minima, and this yields in principle numeric approaches to several problems, based on the iterative calculation of the Laplace transforms of the upwards and downwards ladder times (also called excursions, and busy periods). In this work we propose a different approach of further providing matrix exponential approximations for the distributions of the ladder times. The advantage of this approach is that once a SNMAP approximation is obtained, many similar problems may be solved just by applying the recently developed scale matrix methodology. A numeric experiment for the CB barrier optimization problem is provided.

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Cited in

(6)

• Bayesian network management
• Central governance based on monitoring and reporting solves the collective-risk social dilemma
• Ruin probabilities by Padé's method: simple moments based mixed exponential approximations (Renyi, De Vylder, Cramér-Lundberg), and high precision approximations with both light and heavy tails
• On fluctuation theory for spectrally negative Lévy processes with Parisian reflection below, and applications
• A Dynamic Contagion Risk Model with Recovery Features
• TheW,Zscale functions kit for first passage problems of spectrally negative Lévy processes, and applications to control problems

Describes a project that uses

Uses Software

• Mathematica
• SpectrallyNegativeMarkovAdditiveProcess

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