Tid: 11 maj 2009 kl 09.15-10.00

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Xia Guo och Tao Wang

Titel: Valuation of Life Insurance Contracts with Simulated Guaranteed Interest Rate (Examensarbete -Master thesis)

Abstract

We use Black and Scholes options theory to obtain market valuation of typical life insurance contracts. The contracts are specified as in Grosen & Lochte Jorgensen (2001), but with a slight extension where the guaranteed rate is simulated from market models of short interest rate, such as Vasicek, Cox-Ingesoll-Ross and Ho-Lee models. Another extension is that we assume that the guaranteed rate is equal to the risk free interest rate. Apart from the above extensions, we keep other factors of the model similar as Grosen & Lochte Jorgensen (2001). First, the liability holders have prior claim for company asset than equity holders. Second, a regulatory mechanism is added into the model in order to reduce insolvency risk. Finally, we derive valuation formulas and give numerical examples for initial fair contracts and market values of contracts at different time points.

The full report (pdf)

Till seminarielistan
To the list of seminars