An Application of Fractional Differential Equations to Risk Theory

Corina D. Constantinescu, Jorge M. Ramirez, Wei R. Zhu

Published 2019-05-24Version 1

This paper defines a new class of fractional differential operators alongside a family of random variables whose density functions solve fractional differential equations equipped with these operators. These equations can be further used to construct fractional integro-differential equations for the ruin probabilities in collective renewal risk models, with inter-arrival time distributions from the aforementioned family. Gamma-time risk models and fractional Poisson risk models are two specific cases among them, whose ruin probabilities have explicit solutions, when claim sizes distributions exhibit rational Laplace transforms.