Fair Valuation of Life Insurance Contracts Under a Two-Sided Jump Diffusion Model |
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Authors: | Yinghui Dong Guojing Wang |
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Institution: | 1. Financial Engineering Research Center , Shanghai Jiao Tong University , China;2. Department of Mathematics and Physics , Suzhou University of Science and Technology , Suzhou , China dongyinghui1030@163.com;4. Center for Financial Engineering , Soochow University , Suzhou , China |
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Abstract: | In this article, we study the fair valuation of participating life insurance contract, which is one of the most common life insurance products, under the two-sided jump diffusion model with the consideration of default risk. The participating life insurance contracts considered here can be expressed as portfolios of options as shown by Grosen and Jøgrgensen (1997
Grosen , A. ,
Jøgrgensen , P. (1997). Valuation of early exercisable interest rate guarantees. J. Risk Ins. 64:481–503.Crossref], Web of Science ®] , Google Scholar]). We can give the Laplace transforms for these options under the two-sided jump diffusion model, and then price these options by inverting Laplace transforms. |
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Keywords: | Default Participating life insurance policies Two-sided jump diffusion process |
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