Login | Register

Pricing of Equity-Linked Life Insurance Contracts with Flexible Guarantees


Pricing of Equity-Linked Life Insurance Contracts with Flexible Guarantees

Melnikov, Alexander and Skornyakova, Victoria (2004) Pricing of Equity-Linked Life Insurance Contracts with Flexible Guarantees. Technical Report. Concordia University. Department of Mathematics & Statistics, Montreal, Quebec.

Text (application/pdf)
1_04_Melnikov_Skornyakova.pdf - Published Version


The paper deals with a particular class of equity-linked life insurance contracts called "pure endowment with guarantee". In our setting, these contracts are based on two risky assets in a two-factor jump-diffusion market. The first asset is responsible for the maximal size of future profits, while the second one provides a flexible guarantee to the insured. Quantile hedging methodology and Margrabe’s formula are exploited to price such contracts.

Divisions:Concordia University > Faculty of Arts and Science > Mathematics and Statistics
Item Type:Monograph (Technical Report)
Authors:Melnikov, Alexander and Skornyakova, Victoria
Series Name:Department of Mathematics & Statistics. Technical Report No. 1/04
Corporate Authors:Concordia University. Department of Mathematics & Statistics
Institution:Concordia University
Date:May 2004
Keywords:Equity-linked life insurance, pure endowment, flexible guarantee,quantile hedging, jump-diffusion model
ID Code:6605
Deposited On:03 Jun 2010 19:42
Last Modified:04 Nov 2016 22:57


Aase, K. K., and S. A. Persson (1994): Pricing of unit-linked life insurance policies. Scand. Actuar. J. 1, 26-52.

Bacinello, A. R., Ortu F.(1993): Pricing of unit-linked life insurance with endegeneous minimum guarantees. Insurance: Math and Economics 12, 245-257.

Bacinello, A. R.(2001): Fiar pricing of life insurance participating policies with a minimum interest rate guaranteed? Astin bulletin, V.31, 2, 275- 297.

Bowers, N. L., Gerber, G. C. Hickman, H. U., Jones, D. A. and Nesbit, C. J. (1997): Actuarial Mathematics. Schaumburg, Illinois: The Society of Actuaries.

Boyle, P. P., and E. S. Schwartz (1977): Equilibrium prices of guarantees under equity- linked contracts. Journal of Risk and Insurance 44,639-680.

Boyle, P. P., and M. R. Hardy (1997): Reserving for maturity guarantees: two approaches. Insurance: Mathematics and Economics 21, 113-127.

Brennan, M. J., and E. S. Schwartz (1976): The pricing of equitylinked life insurance policies with an asset value guarantee. J. Financial Economics 3, 195-213.

Brennan, M. J., and E. S. Schwartz (1979): Alternative investment strategies for the issuers of equity-linked life insurance with an asset value guarantee. Journal of Business 52, 63-93.

Delbaen, F. (1986): Equity-linked policies. Bulletin Association Royal Actuaries Belges,80 33-52.

F¨ollmer, H., and P. Leukert (1999): Quantile hedging. Finance Stochast. 3, 251-273.

F¨0llmer, H., and P. Leukert (2000): Efficient hedging: cost versus shortfall risk. Finance Stochast. 4, 117-146.

F¨ollmer, H., and A. Schied (2002): Stochastic Finance: An introduction in discrete time. Berlin – N. Y: Walter de Gruyter.

Krutchenko, R. N. and A., Melnikov (2001): Quantile hedging
for a jump-diffusion financial market, Trends in Mathematics, Ed M. Kohlmann, Birkh¨auser Verlag Basel/ Switzerland, 215-229.

Margrabe, W. (1978): The value of an option to exchange one asset for another, Journal of finance 33, 177-186.

Melnikov, A. V., S. N. Volkov, and M. L. Nechaev (2002):
Mathematics of Financial Obligations. Providence, RI: American Math. Soc.

Melnikov, A. V. (2003): Risk Analysis in Finance and Insurance. Chapman & Hall/CRC.

Moeller, T. (1998): Risk-minimizing hedging strategies for unit-linked life insurance contracts. ASTIN Bulletin 28, 17-47.

Moeller, T. (2002): Hedging equity-linked life insurance contracts. North American Actuarial Journal 5, 79-95.

Shiryaev, A., N. (1999): Essentials of stochastic Finance, World Scientific.
All items in Spectrum are protected by copyright, with all rights reserved. The use of items is governed by Spectrum's terms of access.

Repository Staff Only: item control page

Downloads per month over past year

Back to top Back to top