Journal article | Zeitschriftenartikel
Pricing and capital requirements for with profit contracts: modelling considerations
The aim of this paper is to provide an assessment of alternative frameworks for the fair valuation of life insurance contracts with a predominant financial component, in terms of impact on the market consistent price of the contracts, the embedded options, and the capital requirements for the insurer. In particular, we model the dynamics of the log-returns of the reference fund using the so-called Merton process (Merton, 1976), which is given by the sum of an arithmetic Brownian motion and a compound Poisson process, and the Variance Gamma (VG) process introduced by Madan and Seneta (1990), and further refined by Madan and Milne (1991) and Madan et al. (1998). We conclude that, although the choice of the market model does not affect significantly the market consistent price of the overall benefit due at maturity, the consequences of a model misspecification on the capital requirements are noticeable.
- Extent
-
Seite(n): 803-817
- Language
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Englisch
- Notes
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Status: Postprint; begutachtet (peer reviewed)
- Bibliographic citation
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Quantitative Finance, 9(7)
- Subject
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Wirtschaft
Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Wirtschaftssektoren
Theorieanwendung
- Event
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Geistige Schöpfung
- (who)
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Ballotta, Laura
- Event
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Veröffentlichung
- (where)
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Vereinigtes Königreich
- (when)
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2009
- DOI
- URN
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urn:nbn:de:0168-ssoar-221321
- Rights
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GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln
- Last update
-
21.06.2024, 4:27 PM CEST
Data provider
GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln. If you have any questions about the object, please contact the data provider.
Object type
- Zeitschriftenartikel
Associated
- Ballotta, Laura
Time of origin
- 2009
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