On the Expected Penalty Functions in a Discrete Semi-Markov Risk Model
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Abstract
This paper considers the expected penalty functions for a discrete semi-Markov risk model, which includes several existing risk models such as the compound binomial model (with time-correlated claims) and the compound Markov binomial model (with time-correlated claims) as special cases. Recursive formulae and the initial values for the discounted free penalty functions are derived in the two-state model by an easy method. We also give some applications of our results.
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