Elementary Bounds on the Ruin Capital in a Diffusion Model of Risk

Abstract

In a diffusion model of risk, we focus on the initial capital needed to make the probability of ruin within finite time equal to a prescribed value. It is defined as a solution of a nonlinear equation. The endeavor to write down and to investigate analytically this solution as a function of the premium rate seems not technically feasible. Instead, we obtain informative bounds for this capital in terms of elementary functions.

Keywords

• level premium rate
• level initial capital
• diffusion model of risk