Hybrid life insurance valuation based on a new standard deviation premium principle in a stochastic interest rate framework
(2024) European Actuarial Journal — (2024)
Files
ISBA_RP_2024-24.pdf
Open Access - Adobe PDF
- 957 KB
Details
- Authors
- Abstract
- In a complete arbitrage-free financial market, financial products are valued with the risk-neutral measure and these products are completely hedgeable. In life insurance, the approach is different as the valuation is based on an insurance premium principle which includes a safety loading. The insurer reduces the risk by pooling a vast number of independent risks. In our framework, we suggest valuations of a class of products that are dependent on both mortality and financial risk, namely hybrid life products. The main contribution of this paper is to present a generalized standard deviation premium principle in a stochastic interest rate framework, and to integrate it in different valuation operators suggested in the literature. We illustrate our methods with a classical application, namely a Pure Endowment with profit. Several numerical results are presented, and an extensive sensitivity analysis is included.
- Affiliations
Citations
Belhouari, O., Deelstra, G., & Devolder, P. (2024). Hybrid life insurance valuation based on a new standard deviation premium principle in a stochastic interest rate framework. European Actuarial Journal. Published. https://doi.org/10.1007/s13385-024-00396-2 (Original work published 2024)