On Financial Guarantee Insurance under Stochastic Interest Rates

Van Son Lai and Michel Gendron
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Michel Gendron: Department of Finance and Insurance, Faculty of Administrative Studies, Université Laval, G1K 7P4, Québec, Canada

The Geneva Risk and Insurance Review, 1994, vol. 19, issue 2, 119-137

Abstract: We extend the financial guarantee insurance literature by modeling, under stochastic interest rates, private financial guarantees when the guarantor potentially defaults. By performing numerical simulations under plausible parameters values, we characterize the differential impact of the incorporation of stochasticity of interest rates on the valuation of both public and private guarantees. The Geneva Papers on Risk and Insurance Theory (1994) 19, 119–137. doi:10.1007/BF01371688

Date: 1994
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