Asset Liability Management in Insurance Company

Rossano Giandomenico

MPRA Paper from University Library of Munich, Germany

Abstract: The model, by using the option theory, determines the fair value of the policies life with different time of maturity and shows that the effective liabilities duration of an Insurance Company exposed to the default-risk is different from the duration of a default-free zero coupon bond with the same time of maturity. Furthermore, it shows that the value of equity can be immunized in a dynamic way with respect to the movement of the spot-rate by selling and purchasing the default-free bonds in the firm asset. Moreover, the equity value, by the right bond allocation, can be immunized without varying continually the weight of the bonds on the firm asset. Furthermore, it considers the surrender option and the mortally issue such that it corrects some pitfalls that are commonly encountered in the insurance industry.

Keywords: Contingent Claim; Duration; Immunization (search for similar items in EconPapers)
JEL-codes: G13 G22 (search for similar items in EconPapers)
Date: 2006-06, Revised 2009-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/18843/1/MPRA_paper_18843.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/40057/1/MPRA_paper_40057.pdf revised version (application/pdf)

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