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Ruin theory in a financial corporation model with credit risk. (English) Zbl 1055.91059
Summary: This paper builds a new risk model for a firm which is sensitive to its credit quality. A modified Jarrow, Lando and Turnbull model (Markov chain model) [R. A. Jarrow, D. Lando and S. M. Turnbull, “A Markov model for the term structure of credit risk spreads”, Rev. Financ. Stud. 10, 481–523 (1997)] is used to model the credit rating. Recursive equations for finite time ruin probability and distribution of ruin time are derived. Coupled Volterra type integral equation systems for ultimate ruin probability, severity of ruin and joint distribution of surplus before and after ruin are also obtained. Some numerical results are included.

MSC:
91B30 Risk theory, insurance (MSC2010)
91B28 Finance etc. (MSC2000)
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