The Omega-model with two bankruptcy rates

Esther Frostig, Adva Keren-Pinhasik

Research output: Contribution to journalArticlepeer-review

Abstract

The Omega model assumes that the company continues to do business even when the surplus is negative. However, when the surplus is negative, the bankruptcy probability increases when the deficit grows. We study the Omega model with two state dependent bankruptcy rates, where bankruptcy occurs with probability 1 when the surplus is below a given negative level. Both the classical Cramér-Lundberg risk model and the dual risk model are considered. We obtain the Laplace transforms of the time until bankruptcy and of the time that the surplus is negative.

Original languageEnglish
Pages (from-to)480-516
Number of pages37
JournalStochastic Models
Volume37
Issue number3
DOIs
StatePublished - 2021

Bibliographical note

Funding Information:
The research of Esther Frostig was funded by the Israel Science Foundation (grant No. 1999/18).

Publisher Copyright:
© 2021 Taylor & Francis Group, LLC.

Keywords

  • Bankruptcy probability
  • dual risk model
  • negative period
  • time to bankruptcy

ASJC Scopus subject areas

  • Statistics and Probability
  • Modeling and Simulation
  • Applied Mathematics

Fingerprint

Dive into the research topics of 'The Omega-model with two bankruptcy rates'. Together they form a unique fingerprint.

Cite this