Monotonicity properties and the deficit at ruin in the Sparre Andersen model

Abstract

Let H _u (y) be the (proper) distribution function of the deficit at ruin, given that ruin occurs with initial surplus u, in the Sparre Andersen model of risk theory. Dickson & dos Reis (1996) discussed the monotonicity of H _u (y) as a function of u. In this paper, we obtain various monotonicity results for H _u (y) and other related quantities for the decreasing/increasing failure rate (DFR/IFR) and the increasing/decreasing mean residual lifetime (IMRL/DMRL) classes of distributions. These results in particular extend and make more concrete the results of Dickson & dos Reis (1996) and Willmot & Lin (1998). A new class of distributions (increasing convolution ratio; ICR) is introduced. This class extends the well-known class of distributions with IFR. Specifically, we show that if the ladder height distribution F in the model is ICR, the ratio is a non-decreasing function of u, where ψ(u) denotes the ruin probability and . Further, we obtain generalizations (expressed in terms of the distribution of the deficit) of the well-known new worse than used (NWU) property of the probability of non-ruin.

Keywords:

• Probability of ruin
• Deficit at ruin
• Renewal equation
• DFR class
• IFR class
• IMRL class
• Increasing convolution ratio (ICR) class
• Ladder height

Acknowledgements

The research of the first author was supported by the Greek State Scholarship Foundation.