Importance sampling approximations to various probabilities of ruin of spectrally negative Lévy risk processes

Gatto, Riccardo (2014). Importance sampling approximations to various probabilities of ruin of spectrally negative Lévy risk processes. Applied mathematics and computation, 243, pp. 91-104. Elsevier 10.1016/j.amc.2014.05.077

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This article provides importance sampling algorithms for computing the probabilities of various types ruin of spectrally negative Lévy risk processes, which are ruin over the infinite time horizon, ruin within a finite time horizon and ruin past a finite time horizon. For the special case of the compound Poisson process perturbed by diffusion, algorithms for computing probabilities of ruins by creeping (i.e. induced by the diffusion term) and by jumping (i.e. by a claim amount) are provided. It is shown that these algorithms have either bounded relative error or logarithmic efficiency, as t,x→∞t,x→∞, where t>0t>0 is the time horizon and x>0x>0 is the starting point of the risk process, with y=t/xy=t/x held constant and assumed either below or above a certain constant.

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