A fractional multi-states model for insurance

Donatien Hainaut

Insurance: Mathematics and Economics, 2021, vol. 98, issue C, 120-132

Abstract: A common approach for pricing insurance contracts consists to represent the insured’s health status by a Markov chain. This article extends this framework by observing this chain on a random scale of time, defined as the inverse of an α-stable process. This stochastic clock induces sub-exponential waiting times spent in each state. We first review and extend the properties of this time-change to a conditional filtration at time t>0. Next we evaluate a general type of insurance contract from inception to expiry.

Keywords: Markov chain; fractional calculus; time-changes; Mittag-Leffler function; semi-Markov process (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:98:y:2021:i:c:p:120-132

DOI: 10.1016/j.insmatheco.2021.02.004

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