A law of large numbers approach to valuation in life insurance

Tom Fischer

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The classical Principle of Equivalence ensures that a life insurance company can accomplish that the mean balance per policy converges to zero almost surely for an increasing number of independent policyholders. By certain assumptions, this idea is adapted to the general case with stochastic financial markets. The implied minimum fair price of general life insurance policies is then uniquely determined by the product of the assumed unique equivalent martingale measure of the financial market with the physical measure for the biometric risks. The approach is compared with existing related results. Numeric examples are given. © 2006 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)35-57
Number of pages23
JournalInsurance: Mathematics and Economics
Volume40
Issue number1
DOIs
Publication statusPublished - Jan 2007

Keywords

  • Hedging
  • IB10
  • IM01
  • IM10
  • IM12
  • IM30
  • Law of large numbers
  • Life insurance
  • Principle of equivalence
  • Valuation

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