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dc.contributor.authorLi, Jingen_US
dc.contributor.authorSzimayer, Alexanderen_US
dc.date.accessioned2010-07-26en_US
dc.date.accessioned2010-08-17T12:28:21Z-
dc.date.available2010-08-17T12:28:21Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/38809-
dc.description.abstractWe study the valuation and hedging of unit-linked life insurance contracts in a setting where mortality intensity is governed by a stochastic process. We focus on model risk arising from different specifications for the mortality intensity. To do so we assume that the mortality intensity is almost surely bounded under the statistical measure. Further, we restrict the equivalent martingale measures and apply the same bounds to the mortality intensity under these measures. For this setting we derive upper and lower price bounds for unit-linked life insurance contracts using stochastic control techniques. We also show that the induced hedging strategies indeed produce a dynamic superhedge and subhedge under the statistical measure in the limit when the number of contracts increases. This justifies the bounds for the mortality intensity under the pricing measures. We provide numerical examples investigating fixed-term, endowment insurance contracts and their combinations including various guarantee features. The pricing partial differential equation for the upper and lower price bounds is solved by finite difference methods. For our contracts and choice of parameters the pricing and hedging is fairly robust with respect to misspecification of the mortality intensity. The model risk resulting from the uncertain mortality intensity is of minor importance.en_US
dc.language.isoengen_US
dc.publisherGraduate School of Economics Bonnen_US
dc.relation.ispartofseriesBonn econ discussion papers 2010,13en_US
dc.subject.jelG13en_US
dc.subject.jelG22en_US
dc.subject.jelC61en_US
dc.subject.ddc330en_US
dc.subject.keywordunit-linked life insurance contractsen_US
dc.subject.keywordmortality model risken_US
dc.subject.keywordprice boundsen_US
dc.subject.keywordstochastic controlen_US
dc.subject.stwLebensversicherungen_US
dc.subject.stwIndexierungen_US
dc.subject.stwWertpapieranalyseen_US
dc.subject.stwHedgingen_US
dc.subject.stwVersicherungstechnisches Risikoen_US
dc.subject.stwSterblichkeiten_US
dc.subject.stwStochastischer Prozessen_US
dc.subject.stwKontrolltheorieen_US
dc.subject.stwTheorieen_US
dc.titleThe uncertain mortality intensity framework: Pricing and hedging unit-linked life insurance contractsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn631986537en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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