Ruin Probabilities with Investments in Random Environment: Smoothness

Abstract

This paper deals with the ruin problem of an insurance company investing its capital reserve in a risky asset with the price dynamics given by a conditional geometric Brownian motion whose parameters depend on a Markov process describing random variations in the economic and financial environments. We prove a sufficient condition on the distribution of jumps of the business process ensuring the smoothness of the ruin probability as a function of the initial capital and obtain for this function an integro-differential equation.