A fractional multi-states model for insurance

Donatien Hainaut ()
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Donatien Hainaut: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2021019, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: A common approach for pricing insurance contracts consists to represent the insured's health status by a Markov chain. This article extends this framework by observing this chain on a random scale of time, defined as the inverse of an α-stable process. This stochastic clock induces sub-exponential waiting times spent in each state. We first review and extend the properties of this time-change to a conditional filtration at time t > 0. Next we evaluate a general type of insurance contract from inception to expiry.

Date: 2021-01-01
New Economics Papers: this item is included in nep-ias, nep-ore and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvad:2021019

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