Pricing Participating Products under a Generalized Jump-Diffusion Model

We propose a model for valuing participating life insurance products under a generalized jump-diffusion model with a Markov-switching compensator. It also nests a number of important and popular models in finance, including the classes of jump-diffusion models and Markovian regime-switching models....

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Bibliographic Details
Published inInternational journal of stochastic analysis Vol. 2008; no. 2008; pp. 1 - 30
Main Authors Siu, Tak Kuen, Lau, John W., Yang, Hailiang
Format Journal Article
LanguageEnglish
Published Cairo, Egypt Hindawi Puplishing Corporation 2008
Hindawi Publishing Corporation
John Wiley & Sons, Inc
Hindawi Limited
Subjects
Actuarial science
Diffusion processes
Economic models
Fair value
Insurance policies
Insurance premiums
Life insurance
Markov processes
Methods
Partial differential equations
Pricing
Profits
Simulation methods
Stochastic models
Studies
Valuation
Netherlands
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Summary:We propose a model for valuing participating life insurance products under a generalized jump-diffusion model with a Markov-switching compensator. It also nests a number of important and popular models in finance, including the classes of jump-diffusion models and Markovian regime-switching models. The Esscher transform is employed to determine an equivalent martingale measure. Simulation experiments are conducted to illustrate the practical implementation of the model and to highlight some features that can be obtained from our model.
ISSN:1048-9533
2090-3332
1687-2177
2090-3340
DOI:10.1155/2008/474623