Valuation of Equity-Linked Death Benefits on Two Lives with Dependence

Kokou Essiomle and Franck Adékambi ()
Additional contact information
Kokou Essiomle: School of Economics, University of Johannesburg, Johannesburg 2006, South Africa
Franck Adékambi: School of Economics, University of Johannesburg, Johannesburg 2006, South Africa

Risks, 2023, vol. 11, issue 1, 1-26

Abstract: The purpose of this paper is to investigate equity-linked death benefits for joint alive and last survivor individuals. Utilizing Farlie–Gumbel–Morgenstern (FGM) type dependency modeling framework, we first analyze the joint distribution of the couple (joint alive and last survival density) when marginal distributions follow mixed exponentials and weighted exponentials distributions. Then, we derive the price of the guaranteed minimum death benefit (GMDB) product. In addition, we provide closed analytical expressions of the price of some financial contingent claim contracts (classical and exotic options). Furthermore, we present some numerical results to support our theoretical results. We show in our numerical example that it is important to model the dependency between two lives (couple) since the price changes as the copula parameter changes.

Keywords: equity-linked death benefits; lookback option; multi-life; Farlie–Gumbel–Morgenstern copula; weighted exponentials distributions (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/11/1/21/pdf (application/pdf)
https://www.mdpi.com/2227-9091/11/1/21/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:11:y:2023:i:1:p:21-:d:1034151

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().