Actuarial Valuation and Hedging of Life Insurance Liabilities in the Presence of Stochastic Mortality Risk under the Locally Risk-Minimizing Hedging Approach
The paper examines the valuation and hedging of life insurance obligations in the presence of mortality risk using the local risk-minimizing hedging approach. Roughly speaking, it is assumed that the lifetime of policyholders in an insurance portfolio is modeled by a point process whose stochastic intensity is controlled by a diffusion process. The stock price process is assumed to be a regime-switching L\'evy process with non-zero regime-switching drift, where the parameters are assumed to depend on the economic states. Using the F\"ollmer--Schweizer decomposition, the main valuation and hedging results for a conditional payment process are determined.
Some specific situations have been considered in which the local risk-minimizing strategies for a stream of liability payments or a unit-linked contract are presented
In this study, we explore backward stochastic differential equations driven by a Poisson process and an independent Brownian motion, denoted for short as BSDEJs. The generator exhibits logarithmic…
The predominant approach for studying volatility is through various GARCH specifications, which are widely utilized in model-based analyses. This study focuses on assessing the predictive…
The paper examines the valuation and hedging of life insurance obligations in the presence of mortality risk using the local risk-minimizing hedging approach. Roughly speaking, it is assumed that…