In the insurance business risky investments are dangerous: the case of negative risk sums

@article{Kabanov2002InTI,
  title={In the insurance business risky investments are dangerous: the case of negative risk sums},
  author={Yuri Kabanov and Serguei Pergamenshchikov},
  journal={Finance and Stochastics},
  year={2002},
  volume={20},
  pages={355-379}
}
We find an exact asymptotics of the ruin probability Ψ(u) when the capital of insurance company is invested in a risky asset whose price follows a geometric Brownian motion with mean return a and volatility σ > 0. In contrast to the classical case of non-risky investments where the ruin probability decays exponentially as the initial endowment u tends to… CONTINUE READING