Abstract
This article considers the same model as Ramsay (“The Asymptotic Ruin Problem When the Healthy and Sickness Periods Form an Alternating Renewal Process.” Insurance: Mathematics and Economics 3:139–43) modified by the inclusion of the interest rate. Exponential type upper bounds for the ultimate ruin probability are derived by martingale and recursive techniques. To illustrate the results, we consider the cases where the length of sickness period and that of healthy period follow Erlang distribution. We then compare numerically the upper bound derived by each technique.
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