Jump diffusion transition intensities in life insurance and disability annuity

Jiwook Jang and Siti Norafidah Mohd Ramli

Insurance: Mathematics and Economics, 2015, vol. 64, issue C, 440-451

Abstract: We study the effects of jump diffusion transition intensities on a life insurance and disability annuity. To do so, we use a multi-states Markov chain with multiple decrement. Assuming independent statewise intensities, we evaluate the prospective reserve for this scheme where the insured life is in Active or Disabled state at inception, respectively. We also examine the components of the prospective reserves by changing the relevant parameters of the transition intensities, which are the jump size, the average frequency of jumps as well as the diffusion parameters, assuming deterministic rate of interest. The computation of the reserve sensitivity with their figures are provided.

Keywords: Mortality and morbidity rate; Jump diffusion process; Cox process; Hierarchical Markov model; Term insurance and disability annuity (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:64:y:2015:i:c:p:440-451

DOI: 10.1016/j.insmatheco.2015.07.002

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