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Actuarial Valuation and Hedging of Life Insurance Liabilities in the Presence of Stochastic Mortality Risk under the Locally Risk-Minimizing Hedging Approach.
- Source :
- Symmetry (20738994); Feb2024, Vol. 16 Issue 2, p165, 22p
- Publication Year :
- 2024
-
Abstract
- The paper examines the valuation and hedging of life insurance obligations in the presence of mortality risk using the local risk-minimizing hedging approach. Roughly speaking, it is assumed that the lifetime of policyholders in an insurance portfolio is modeled by a point process whose stochastic intensity is controlled by a diffusion process. The stock price process is assumed to be a regime-switching Lévy process with non-zero regime-switching drift, where the parameters are assumed to depend on the economic states. Using the Föllmer–Schweizer decomposition, the main valuation and hedging results for a conditional payment process are determined. Some specific situations have been considered in which the local risk-minimizing strategies for a stream of liability payments or a unit-linked contract are presented. [ABSTRACT FROM AUTHOR]
- Subjects :
- LIFE insurance
LIABILITY insurance
HEDGING (Finance)
LEVY processes
VALUATION
Subjects
Details
- Language :
- English
- ISSN :
- 20738994
- Volume :
- 16
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Symmetry (20738994)
- Publication Type :
- Academic Journal
- Accession number :
- 175650485
- Full Text :
- https://doi.org/10.3390/sym16020165