Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258037 
Year of Publication: 
2020
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 8 [Issue:] 3 [Article No.:] 84 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-23
Publisher: 
MDPI, Basel
Abstract: 
One of the risks derived from selling long-term policies that any insurance company has arises from interest rates. In this paper, we consider a general class of stochastic volatility models written in forward variance form. We also deal with stochastic interest rates to obtain the risk-free price for unit-linked life insurance contracts, as well as providing a perfect hedging strategy by completing the market. We conclude with a simulation experiment, where we price unit-linked policies using Norwegian mortality rates. In addition, we compare prices for the classical Black-Scholes model against the Heston stochastic volatility model with a Vasicek interest rate model.
Subjects: 
unit-linked policies
pure endowment
term insurance
stochastic volatility models
stochastic interest rates
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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