| Abstract: | In this paper a stochastic process involving two-sided jumps and a continuous downward drift is studied. In the context of
ruin theory, the model can be interpreted as the surplus process of a business enterprise which is subject to constant expense
rate over time along with random gains and losses. On the other hand, such a stochastic process can also be viewed as a queueing
system with instantaneous work removals (or negative customers). The key quantity of our interest pertaining to the above
model is (a variant of) the Gerber–Shiu expected discounted penalty function (Gerber and Shiu in N. Am. Actuar. J. 2(1):48–72,
1998) from ruin theory context. With the distributions of the jump sizes and their inter-arrival times left arbitrary, the general
structure of the Gerber–Shiu function is studied via an underlying ladder height structure and the use of defective renewal
equations. The components involved in the defective renewal equations are explicitly identified when the upward jumps follow
a combination of exponentials. Applications of the Gerber–Shiu function are illustrated in finding (i) the Laplace transforms
of the time of ruin, the time of recovery and the duration of first negative surplus in the ruin context; (ii) the joint Laplace
transform of the busy period and the subsequent idle period in the queueing context; and (iii) the expected total discounted
reward for a continuous payment stream payable during idle periods in a queue. |
