Time-Consistent Actuarial Valuations
Abstract
Recent theoretical results establish that time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial premium principles when such backward iteration procedures are applied. We show that the one-period variance premiumprinciple converges to the non-linear exponential indifference valuation. Furthermore, we study the convergence of the one-period standard-deviation principle and establish that the Cost-of-Capital principle, which is widely used by the insurance industry, converges to the same limit as the standard-deviation principle. Finally, we study the connections between our time-consistent pricing operators, Good Deal Bound pricing and pricing under model ambiguity.
Keywords
Cite
@article{arxiv.1109.1751,
title = {Time-Consistent Actuarial Valuations},
author = {Antoon Pelsser},
journal= {arXiv preprint arXiv:1109.1751},
year = {2011}
}