Paper detail

Minimal Solutions to the Skorokhod Reflection Problem Driven by Jump Processes and an Application to Reinsurance

We consider a reflected process in the positive orthant driven by an exogenous jump process. For a given input process, we show that there exists a unique minimal strong solution to the given particle system up until a certain maximal stopping time, which is stated explicitly in terms of the dual formulation of a linear programming problem associated with the state of the system. We apply this model to study the ruin time of interconnected insurance firms, where the stopping time can be interpreted as the failure time of a reinsurance agreement between the firms. Our work extends the analysis of the particle system in Baker, Hambly, and Jettkant (2025) to the case of jump driving processes, and the existence result of Reiman (1984) beyond the case of sub-stochastic reflection matrices.