Infinite-Horizon Probability of Ruin for a Variable-Memory Counting Process (Hawkes Process)

Abstract

The reserve R(t) of an insurance company denotes the accumulated capital up to time ttt throughout its operational span. While this reserve can be modeled using stochastic processes, the endeavor remains notably intricate. The mathematical complexity presents a considerable obstacle for researchers within this domain. Prior research has predominantly focused on reserve models constructed from Markovian processes. In this manuscript, our attention shifts to risk models derived from non-Markovian processes, particularly those with claim arrivals governed by Hawkes processes. Before delving into the core subject matter, we provide an extensive review of the literature on counting processes with variable memory. This includes a thorough exploration of Hawkes processes, Gerber-Shiu functions, integro-differential equations, and Laplace transforms. These elements are crucial for computing the probability of ruin over an infinite time horizon, especially in scenarios where interdependence exists between inter-claim times. Additionally, we present the requisite mathematical tools essential for comprehending the contents of this article, specifically tailored for individuals with a foundational understanding of actuarial science. Furthermore, we have successfully determined the probability of ruin, marking a significant milestone in our investigation.