Valuation of contingent claims with stochastic interest rate and mortality driven by Lévy processes

Qian Zhao, Peng Li and Jie Zhang

Communications in Statistics - Theory and Methods, 2020, vol. 49, issue 14, 3421-3437

Abstract: In this paper, we consider a model with stochastic interest rate and stochastic mortality, which is driven by a Lévy process. Under the assumption that the stochastic mortality and interest rate are dependent, we discuss the valuation of life insurance contracts. Employing the method of change of measure together with the Bayes’ rule, we present the pricing formulas in closed form for the survival and death benefit models. Finally, numerical experiments illustrate the effects of some parameters.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:taf:lstaxx:v:49:y:2020:i:14:p:3421-3437

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DOI: 10.1080/03610926.2019.1589514

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