Next Article in Journal
A Duality Result for the Generalized Erlang Risk Model
Previous Article in Journal
A Note on the Fundamental Theorem of Asset Pricing under Model Uncertainty
Article Menu

Export Article

Open AccessArticle
Risks 2014, 2(4), 434-455; doi:10.3390/risks2040434

A Markov Chain Model for Contagion

1
Department of Statistics, London School of Economics, Houghton Street, London WC2A 2AE, UK
2
Department of Finance, School of Economics & Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China
*
Authors to whom correspondence should be addressed.
Received: 22 September 2014 / Revised: 27 October 2014 / Accepted: 29 October 2014 / Published: 5 November 2014
View Full-Text   |   Download PDF [316 KB, uploaded 5 November 2014]   |  

Abstract

We introduce a bivariate Markov chain counting process with contagion for modelling the clustering arrival of loss claims with delayed settlement for an insurance company. It is a general continuous-time model framework that also has the potential to be applicable to modelling the clustering arrival of events, such as jumps, bankruptcies, crises and catastrophes in finance, insurance and economics with both internal contagion risk and external common risk. Key distributional properties, such as the moments and probability generating functions, for this process are derived. Some special cases with explicit results and numerical examples and the motivation for further actuarial applications are also discussed. The model can be considered a generalisation of the dynamic contagion process introduced by Dassios and Zhao (2011). View Full-Text
Keywords: risk model; contagion risk; bivariate point process; Markov chain model;discretised dynamic contagion process; dynamic contagion process risk model; contagion risk; bivariate point process; Markov chain model;discretised dynamic contagion process; dynamic contagion process
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

Dassios, A.; Zhao, H. A Markov Chain Model for Contagion. Risks 2014, 2, 434-455.

Show more citation formats Show less citations formats

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top