Polynomial Diffusion Models for Life Insurance Liabilities
Mathematical Finance
2016-09-26 v4
Abstract
In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a compact state space. Such a model guarantees not only the positivity of the OIS short rate and the mortality intensity, but also the possibility of approximating both pricing formula and hedging strategy of a large class of life insurance products by explicit formulas.
Keywords
Cite
@article{arxiv.1602.07910,
title = {Polynomial Diffusion Models for Life Insurance Liabilities},
author = {Francesca Biagini and Yinglin Zhang},
journal= {arXiv preprint arXiv:1602.07910},
year = {2016}
}