Scaled insurance cash flows: representation and computation via change of measure techniques

Christian Furrer ()
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Christian Furrer: University of Copenhagen

Finance and Stochastics, 2022, vol. 26, issue 2, No 7, 359-382

Abstract: Abstract We consider general multi-state life insurance payment processes and study the expected accumulated cash flows that arise when modifying the payments by scaling factors depending on the time of occurrence of specific events. Such modified payment processes arise naturally in the context of incidental policyholder behaviour. We associate to the modifications new probability measures which allow a standard representation of the expected accumulated cash flows. The measures are characterised in terms of the original measure and the scaling factors. Examples for Markov chains illuminate the relevance of our concepts and results to actuarial practice.

Keywords: Multi-state life insurance; Incidental policyholder behaviour; Jump processes; Föllmer measures; 91G99; 60G57; 60J27 (search for similar items in EconPapers)
JEL-codes: C02 G22 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00780-022-00472-z

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