Related papers: Hedging Pure Endowments with Mortality Derivatives

We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…

This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…

This paper examines the valuation and hedging of standard equity protection swap (EPS) products proposed by Xu et al.. To account for financial crises and counterparty default risk, we develop pricing frameworks based on Merton's…

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We assume the limited capital for hedging and we provide with the best strategy for an insurance company in the meaning of so…

Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…

Variable annuities, as a class of retirement income products, allow equity market exposure for a policyholder's retirement fund with electable additional guarantees to limit the downside risk of the market. Management fees and guarantee…

In this article we investigate a state-space representation of the Lee-Carter model which is a benchmark stochastic mortality model for forecasting age-specific death rates. Existing relevant literature focuses mainly on mortality…

This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…

We consider a semimartingale market model when the underlying diffusion has a singular volatility matrix and compute the hedging portfolio for a given payoff function. Recently, the representation problem for such degenerate diffusions with…

In this paper, we investigate a complex variation of the standard joint life annuity policy by introducing three distinct contingent benefits for the surviving member(s) of a couple, along with a contingent benefit for their beneficiaries…

This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…

Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…

In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].

Experimentation involves risk. The investigator expends time and money in the pursuit of data that supports a hypothesis. In the end, the investigator may find that all of these costs were for naught and the data fail to reject the null.…

In this paper, we review pricing of variable annuity living and death guarantees offered to retail investors in many countries. Investors purchase these products to take advantage of market growth and protect savings. We present pricing of…

Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…

We propose the use of statistical emulators for the purpose of valuing mortality-linked contracts in stochastic mortality models. Such models typically require (nested) evaluation of expected values of nonlinear functionals of…

Most insurance contracts are inherently linked to financial markets, be it via interest rates, or -- as hybrid products like equity-linked life insurance and variable annuities -- directly to stocks or indices. However, insurance contracts…

Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…

Although the valuation of life contingent assets has been thoroughly investigated under the framework of mathematical statistics, little financial economics research pays attention to the pricing of these assets in a non-arbitrage, complete…