On a discrete-time risk model with interaction between classes of business

Abstract

In this paper, a discrete-time risk model with dependent classes of business called the interaction (IR) model is proposed. The model assumes that the number of claims in one class is governed not only by its underlying risk but also by the risks in other classes. For a family of claim-number distributions, the IR model is examined. Numerical studies are carried out to compare the finite-time ruin probabilities of the model to those of other correlated aggregate claims models in the literature. For the infinite-time ruin probabilities, comparisons between these models in terms of their adjustment coefficients are also made.