On the analysis of a multi-threshold Markovian risk model

ISSN： 0346-1238

Source： Scandinavian Actuarial Journal, Vol.2007, Iss.4, 2007-01, pp. : 248-260

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Abstract

We consider a class of Markovian risk models perturbed by a multiple threshold dividend strategy in which the insurer collects premiums at rate ci whenever the surplus level resides in the i-th surplus layer, i=1, 2, …,n+1 where n<∞. We derive the Laplace-Stieltjes transform (LST) of the distribution of the time to ruin as well as the discounted joint density of the surplus prior to ruin and the deficit at ruin. By interpreting that the insurer, whose gross premium rate is c, pays dividends continuously at rate di=c-ci whenever the surplus level resides in the i-th surplus layer, we also derive the expected discounted value of total dividend payments made prior to ruin. Our results are obtained via a recursive approach which makes use of an existing connection, linking an insurer's surplus process to an embedded fluid flow process.