Homogeneous Discrete Time Alternating Compound Renewal Process: A Disability Insurance Application

Figure 6

Mean financial evolution of an alternating compound renewal process. The tall segments divide the periods from the periods, the short the years. It is supposed that the durations of each period and are and , respectively. Only the last period will have different duration depending on the length of the contract. The closed boxes denote the rate rewards paid for a period less than one time unit. The length represents the last part of the th (see, e.g., the length of the segment that goes from 3 to ). The length shows the first part of the th (see, e.g., the length of the segment that goes from to 12). The one side open boxes represent the rate rewards paid for a period less than one time unit. The lengths and give, respectively, the first and the last parts of the th -period.