RISK THEORY$-$RUIN THEORY

Example

Initial surplus $=2$RISK THEORY$-$RUIN THEORY

Example

Initial surplus $=2$RISK THEORY$-$RUIN THEORY

Example

Initial surplus $=2$RISK THEORY$-$RUIN THEORY

Example

Initial surplus $=2$

RISK THEORY$-$RUIN THEORY

Example

Initial surplus $=2$& premium $=2\mathrm{.}5$ collected at the beginning of each year

Annual losses: $0,2,4$&$6$ with probabilities $0\mathrm{.}4,0\mathrm{.}3,0\mathrm{.}2$&$0\mathrm{.}1,$ respectively. Paid at the end of the year. Rebate of $0\mathrm{.}5$ is given in any year in which there are no losses.

Interest is eared at $10\%$ on any surplus available at the beginning of the year

Determine the probability of ruin at the end of the first two years.