A law of large numbers approach to valuation in life insurance

Tom Fischer

doi:10.1016/j.insmatheco.2006.02.009

A law of large numbers approach to valuation in life insurance

Tom Fischer

Research output: Contribution to journal › Article › peer-review

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 language	English
Pages (from-to)	35-57
Number of pages	23
Journal	Insurance: Mathematics and Economics
Volume	40
Issue number	1
DOIs	https://doi.org/10.1016/j.insmatheco.2006.02.009
Publication status	Published - Jan 2007

Keywords

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

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10.1016/j.insmatheco.2006.02.009

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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. {\textcopyright} 2006 Elsevier Ltd. All rights reserved.",

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AB - 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.

KW - Hedging

KW - IB10

KW - IM01

KW - IM10

KW - IM12

KW - IM30

KW - Law of large numbers

KW - Life insurance

KW - Principle of equivalence

KW - Valuation

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VL - 40

SP - 35

EP - 57

JO - Insurance: Mathematics and Economics

JF - Insurance: Mathematics and Economics

IS - 1

ER -

A law of large numbers approach to valuation in life insurance

Abstract

Keywords

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