Gerber-Shiu theory for discrete risk processes in a regime switching environment

DOI10.1016/J.AMC.2023.128491MaRDI QIDQ6130164zbMATH OpenOpenAlexFDO

Authors Zbigniew Palmowski, Lewis Ramsden, Apostolos D. Papaioannou

Publication date 18 April 2024

Published in Applied Mathematics and Computation (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2207.05339

zbMATH Keywords

discrete-timedividendsMarkov additive processMarkov-modulationexit problemsscale matricesGerber-Shiudual risk process

Mathematics Subject Classification ID

Mathematical economics (91Bxx) Stochastic processes (60Gxx) Special processes (60Kxx)

Abstract: In this paper we develop the Gerber-Shiu theory for the classic and dual discrete risk processes in a Markovian (regime switching) environment. In particular, by expressing the Gerber-Shiu function in terms of potential measures of an upward (downward) skip-free discrete-time and discrete-space Markov Additive Process (MAP), we derive closed form expressions for the Gerber-Shiu function in terms of the so-called (discrete) $$ and $$ scale matrices, which were introduced in arXiv:2008.06697. We show that the discrete scale matrices allow for a unified approach for identifying the Gerber-Shiu function as well as the value function of the associated constant dividend barrier problems.

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