Exact asymptotics of the ruin probability in the Sparre Andersen model

Abstract

For the Sparre Andersen non-life insurance model with investments in an arbitrary Lévy process, we establish the exact power-law asymptotics of the ruin probability $Ψ(u)\sim C^* u^{-β}$ as $u\to\infty$ with a positive finite constant $C^*$; the exponent $β$ is the Cramér root of the Laplace exponent of the Lévy process describing the logarithm of the risky asset price. This strengthens previously known two-sided estimates of the order -- the existence of an exact limit had remained an open question. The proof combines a reduction to discrete time, the one-dimensional Kesten-Goldie theorem for the stationary measure of the associated affine recursion, and Goldie's result on the asymptotics of the supremum of a perpetuity.