Equilibrium Prices Of Guarantees Under Unit-Linked Life Insurance Contracts

Diana-Maria Chis (), Cristina Ciumas () and Emilia-Anuta Corovei ()

Knowledge Horizons - Economics, 2017, vol. 9, issue 2, 47-53

Abstract: The guarantee under a unit-linked contract can be viewed as an option exercisable at the maturity date entitling the policyholder to the greater of the value of the units or the guaranteed amount. The principles of the Option Pricing Model were employed to derive the equilibrium premium for both a single-premium contract and a periodic-premium contract and some numerical simulation were presented. The aim of this study is to determine the equilibrium values of guarantees on single premium contracts and regular premium contracts. Also this research prescribes an optimal investment policy for the insurance company selling these policies.

Keywords: Investment strategies; Investment guarantees; BlackScholes-Merton Model; Theory of options; Equilibrium prices (search for similar items in EconPapers)
JEL-codes: C58 G12 G17 G22 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:khe:journl:v:9:y:2017:i:2:p:47-53

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