Fair valuation of participating policies with surrender options and regime switching

被引：59
|
作者：
Siu, TK [1 ]
机构：
[1] Heriot Watt Univ, Sch Math & Comp Sci, Dept Actuarial Math & Stat, Edinburgh EH14 4AS, Midlothian, Scotland
来源：
INSURANCE MATHEMATICS & ECONOMICS | 2005年 / 37卷 / 03期
关键词：
participating American policies; perpetual contracts; change of measures; second-order piecewise linear ODEs; regime switching;
D O I：
10.1016/j.insmatheco.2005.05.007
中图分类号：
F [经济];
学科分类号：
02 ;
摘要：
We consider the fair valuation of a participating life insurance policy with surrender options when the market values of the asset are modelled by Markov-modulated Geometric Brownian Motion (GBM). We reduce the dimension of the optimal stopping problem for the policy by changing probability measures. We also provide a decomposition result for the value of the policy. The Barone-Adesi-Whaley approximation has been employed to approximate the solution of the free boundary problem for the policy by second-order piecewise linear ordinary differential equations (ODEs). The fair valuation of participating perpetual American contracts are also considered. (c) 2005 Elsevier B.V. All rights reserved.
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页码：533 / 552
页数：20
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