Actuarial risk management of investment guarantees in life insurance
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Date
2010-11
Authors
Bekker, Kobus Nel
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Free State
Abstract
Investment guarantees in life insurance business have generated a lot of research in recent years
due to the earlier mispricing of such products. These guarantees generally take the form of exotic
options and are therefore difficult to price analytically, even in a simplified setting. A possible
solution to the risk management problem of investment guarantees contingent on death and
survival is proposed through the use of a conditional lower bound approximation of the corresponding
embedded option value. The derivation of the conditional lower bound approximation
is outlined in the case of regular premiums with asset-based charges and the implementation is
illustrated in a Black-Scheles-Merton setting. The derived conditional lower bound approximation
also facilitates verifying economic scenario generator based pricing and valuation, as well as
sensitivity measures for hedging solutions.
Description
Keywords
Life insurance, Life insurance -- Mathematics, Life insurance -- Risk assessment, Insurance -- Statistics, Thesis (Ph.D. (Mathematical Statistics))--University of the Free State, 2010