Polynomial diffusion models for life insurance liabilities

Francesca Biagini and Yinglin Zhang

Insurance: Mathematics and Economics, 2016, vol. 71, issue C, 114-129

Abstract: In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a compact state space. Such a model can be used to guarantee not only the positivity of the OIS short rate and the mortality intensity, but also the possibility of approximating both pricing formula and hedging strategy of a large class of life insurance products by explicit formulas.

Keywords: Life insurance liability; Polynomial diffusion; Benchmark approach; Stochastic mortality intensity; Benchmarked risk-minimization (search for similar items in EconPapers)
JEL-codes: C02 G10 G19 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:71:y:2016:i:c:p:114-129

DOI: 10.1016/j.insmatheco.2016.08.008

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