A Note on Wiener–Hopf Factorization for Markov Additive Processes

We prove the Wiener–Hopf factorization for Markov additive processes. We derive also Spitzer–Rogozin theorem for this class of processes which serves for obtaining Kendall’s formula and Fristedt representation of the cumulant matrix of the ladder epoch process. Finally, we also obtain the so-called ballot theorem.     

A note on chaotic and predictable representations for Itô–Markov additive processes

In this article, we provide predictable and chaotic representations for Itô–Markov additive processes X. Such a process is governed by a finite-state continuous time Markov chain J which allows one to modify the parameters of the Itô-jump process (in so-called regime switching manner). In addition, the transition of J triggers the jump of X distributed depending on the states of J just prior to the transition. This family of processes includes Markov modulated Itô–Lévy processes and Markov additive processes. The derived chaotic representation of a square-integrable random variable is given as a sum of stochastic integrals with respect to some explicitly constructed orthogonal martingales. We identify the predictable representation of a square-integrable martingale as a sum of stochastic integrals of predictable processes with respect to Brownian motion and power-jumps martingales related to all the jumps appearing in the model. This result generalizes the seminal result of Jacod–Yor and is of importance in financial mathematics. The derived representation then allows one to enlarge the incomplete market by a series of power-jump assets and to price all market-derivatives.     

Fluctuations of Omega-killed spectrally negative Lévy processes

In this paper we solve the exit problems for (reflected) spectrally negative Lévy processes, which are exponentially killed with a killing intensity dependent on the present state of the process and analyze respective resolvents. All identities are given in terms of new generalizations of scale functions. For the particular cases $\omega \left(x\right)=q$ and $\omega \left(x\right)=q{\mathbf{1}}_{(a,b)}\left(x\right)$, we obtain results for the classical exit problems and the Laplace transforms of the occupation times in a given interval, until first passage times, respectively. Our results can also be applied to find the bankruptcy probability in the so-called Omega model, where bankruptcy occurs at rate $\omega \left(x\right)$ when the Lévy surplus process is at level $x<0$. Finally, we apply these results to obtain some exit identities for spectrally positive self-similar Markov processes. The main method throughout all the proofs relies on the classical fluctuation identities for Lévy processes, the Markov property and some basic properties of a Poisson process.     

Tail behaviour of the area under a random process, with applications to queueing systems, insurance and percolations

The areas under the workload process and under the queueing process in a single-server queue over the busy period have many applications not only in queueing theory but also in risk theory or percolation theory. We focus here on the tail behaviour of distribution of these two integrals. We present various open problems and conjectures, which are supported by partial results for some special cases.     

Dividend Problem with Parisian Delay for a Spectrally Negative Lévy Risk Process

In this paper, we consider dividend problem for an insurance company whose risk evolves as a spectrally negative Lévy process (in the absence of dividend payments) when a Parisian delay is applied. An objective function is given by the cumulative discounted dividends received until the moment of ruin, when a so-called barrier strategy is applied. Additionally, we consider two possibilities of a delay. In the first scenario, ruin happens when the surplus process stays below zero longer than a fixed amount of time. In the second case, there is a time lag between the decision of paying dividends and its implementation.     

Tail Behaviour of the Area Under the Queue Length Process of the Single Server Queue with Regularly Varying Service Times

This paper considers a stable GI∨GI∨1 queue with a regularly varying service time distribution. We derive the tail behaviour of the integral of the queue length process Q(t) over one busy period. We show that the occurrence of a large integral is related to the occurrence of a large maximum of the queueing process over the busy period and we exploit asymptotic results for this variable. We also prove a central limit theorem for ∫₀^t Q(s) ds.AMS subject classification: 60K25, 90B22.     

Quantile hedging for equity-linked contracts

We consider an equity-linked contract whose payoff depends on the lifetime of the policy holder and the stock price. We provide the best strategy for an insurance company assuming limited capital for the hedging. The main idea of the proof consists in reducing the construction of such strategies for a given claim to a problem of superhedging for a modified claim, which is the solution to a static optimization problem of the Neyman-Pearson type. This modified claim is given via some sets constructed in an iterative way. Some numerical examples are also given.