The finite-time ruin probability in the presence of Sarmanov dependent financial and insurance risks

Abstract

Consider a discrete-time insurance risk model. Within period i, i ≥ 1, X i and Y i denote the net insurance loss and the stochastic discount factor of an insurer, respectively. Assume that {(X i , Y i ), i ≥ 1} form a sequence of independent and identically distributed random vectors following a common bivariate Sarmanov distribution. In the presence of heavy-tailed net insurance losses, an asymptotic formula is derived for the finite-time ruin probability.