Risk-minimizing hedging strategies for insurance payment processes

Thomas Møller ()
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Thomas Møller: Laboratory of Actuarial Mathematics, Institute for Mathematical Sciences, University of Copenhagen, Universitetsparken 5, DK-2100 Copenhagen Ø, Denmark Manuscript

Finance and Stochastics, 2001, vol. 5, issue 4, 419-446

Abstract: Föllmer and Sondermann (1986) proved the existence of a unique admissible risk-minimizing hedging strategy for any square-integrable contingent claim H in the martingale case. We extend this approach to the situation where the hedger's liabilities are described by a general payment process A and consider some examples related to insurance. These include a general unit-linked life insurance contract driven by a Markov jump process and a claim process from non-life insurance where the claim size distribution is affected by a traded price index.

Keywords: Risk-minimization; incomplete market; payment streams; unit-linked life insurance; marked point process (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2001-10-04
Note: received: November 1998; final version received: October 2000
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Citations: View citations in EconPapers (16)

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