Dynamics of state-wise prospective reserves in the presence of non-monotone information

Marcus C. Christiansen and Christian Furrer

Insurance: Mathematics and Economics, 2021, vol. 97, issue C, 81-98

Abstract: In the presence of monotone information, the stochastic Thiele equation describing the dynamics of state-wise prospective reserves is closely related to the classic martingale representation theorem. When the information utilized by the insurer is non-monotone, the classic martingale theory does not apply. By taking an infinitesimal approach, we derive a generalized stochastic Thiele equation that allows for information discarding. En passant, we solve some open problems for the classic case of monotone information. The results and their implication in practice are illustrated via examples where information is discarded upon and after stochastic retirement.

Keywords: Life insurance; Stochastic Thiele equations; Infinitesimal martingales; Marked point processes; Stochastic retirement (search for similar items in EconPapers)
JEL-codes: C02 G22 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:97:y:2021:i:c:p:81-98

DOI: 10.1016/j.insmatheco.2021.01.005

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