Multi-state models for evaluating conversion options in life insurance

Guglielmo D'Amico, Montserrat Guillen, Raimondo Manca and Filippo Petroni

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Abstract: In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the valuation of the option such as the duration problem, the time non-homogeneity and the ageing effect. The value of the conversion option is evaluated after the formal description of this contract.

Date: 2017-07
New Economics Papers: this item is included in nep-age, nep-ias and nep-rmg
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Published in Modern Stochastics: Theory and Applications 2017, Vol. 4, No. 2, 127-139

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1707.01028

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