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Risk-Minimizing Strategies for Life Insurance Contracts with Mortality Risk
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When
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17.00
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Where
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B617
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Presentations
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Speaker
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Jérôme Barbarin
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From
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Institute of Actuarial Sciences, Catholic University of Louvain, Belgium
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Abstract
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In this paper, we study the risk-minimizing strategies of life insurance contracts with mortality risk. This problem has already been studied in Dahl and Møller (2006). We extend their results in at least three directions. Firstly, we assume the financial assets prices follow arbitrary local martingales. Secondly, we allow for (almost) arbitrary stochastic probability distribution functions of the time of death of the policyholders. Thirdly, the insurance payments are not deterministic but can depend on the evolution of the financial market.
In this general setting, we show the risk-minimizing strategies of a life insurance contract are given by an average of risk-minimizing strategies of purely financial claims, weighted by the stochastic survival probabilities. The corollary of this is that, finding the risk-minimizing strategies of a life insurance contract can be separated in two independent problems, one purely actuarial related to the modelling of the (stochastic) survival probability distribution functions, and one purely financial related to the hedging of purely financial claims.
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For further information
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Tom Hewlett (Postgraduate Administrator) Ext. 6879
Department of Statistics, Columbia House
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