Abstract
This paper synthesizes and contributes to the literature on ruin probabilities in two different contexts. First it explores a Markov (Lindley-Spitzer) process arising in a model of sustainable consumption of a renewable resource under uncertainty. The focus is on the rate of convergence of the stock process, particularly in the heavy-tailed case. Next, it turns to the characterization of the ruin probability in the Sparre Andersen model of insurance. Both the heavy- and light-tailed cases are investigated. Finally, some remarks on the mathematical connections between the two models are made.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 59-74 |
| Number of pages | 16 |
| Journal | International Journal of Economic Theory |
| Volume | 11 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 1 2015 |
| Externally published | Yes |
Keywords
- Convergence rates
- Heavy tails
- Insurance
- Invariant distributions
- Light tails
- Lindley-Spitzer process
- Lundberg bound
- Renewable resource
- Ruin probabilities
- Sparre Andersen model
- Sustainable consumption
ASJC Scopus subject areas
- Economics and Econometrics
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