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