Fair Valuation of Insurance Liability Cash-Flow Streams in Continuous Time: Applications

Delong, Łukasz; Dhaene, Jan; Barigou, Karim

doi:10.1017/asb.2019.8

Cited by 27 publications

(9 citation statements)

References 16 publications

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“…In order to investigate a set of models more closely resembling an insurance cash flow, we also consider an example closely inspired by that in [8]. Essentially, we will assume the liability cash flow to be given by life insurance policies where we take into account age cohorts and their sizes at each time, along with financial data relevant to the contract payouts.…”

Section: Life Insurance Modelsmentioning

confidence: 99%

Least Squares Monte Carlo applied to Dynamic Monetary Utility Functions

Engsner¹

2021

Preprint

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In this paper we explore ways of numerically computing recursive dynamic monetary risk measures and utility functions. Computationally, this problem suffers from the curse of dimensionality and nested simulations are unfeasible if there are more than two time steps. The approach considered in this paper is to use a Least Squares Monte Carlo (LSM) algorithm to tackle this problem, a method which has been primarily considered for valuing American derivatives, or more general stopping time problems, as these also give rise to backward recursions with corresponding challenges in terms of numerical computation. We give some overarching consistency results for the LSM algorithm in a general setting as well as explore numerically its performance for recursive Cost-of-Capital valuation, a special case of a dynamic monetary utility function.

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Section: Life Insurance Modelsmentioning

confidence: 99%

Least Squares Monte Carlo applied to Dynamic Monetary Utility Functions

Engsner¹

2021

Preprint

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“…The main basic points of FCFM are divided into two aspects. First, to a certain extent, the fluctuation of cash flow will cause a series of changes in enterprise value, which is impossible to realize profits; Secondly, only by fully and reasonably considering the factors of the time value of money, can the model become more complete [5][6].…”

Section: Theoretical Basis and Model Construction Of Fcfmmentioning

confidence: 99%

Architecture and Energy Efficiency of Distributed Biomass based CCHP System based on FCF Method

2021

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China is a large agricultural country with a huge amount of biomass energy. However, due to the current energy structure, most of the biomass energy in China has not been fully utilized, which not only wastes energy, but also pollutes the environment. The CCHP system is a new type of distributed energy system, so the characteristics of biomass energy are suitable for the energy consumption mode of CCHP system; In this paper, the FCF method(FCFM) is proposed to study and analyze the architecture and energy efficiency(EE) of distributed biomass CCHP system. The working principle of distributed CCHP system and distributed biomass CCHP system are discussed; A FCF optimization objective function model is proposed, and the energy structure and characteristics of biomass cogeneration system are analyzed. A typical rural community is selected as the research object. According to the load data table of the object system, the utilization changes of cooling, heating and electricity loads of the object in a year are analyzed. Biomass cogeneration system converts biomass energy as efficiently as possible through biomass gasification. The whole process realizes the stepped utilization of energy, which has better environmental benefits than conventional cogeneration system.

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“…, n}. We remark that this PDE was considered in (Delong et al (2019a), Example 4.5). The first part of the PDE (4.4) exactly corresponds to the standard Black-Scholes PDE but the second part adds a risk margin for the uncertainty about the number of survivals which cannot be completely hedged.…”

Section: Pricing a Portfolio Of Gmmb Contracts In The Black-scholes F...mentioning

confidence: 99%

Pricing equity-linked life insurance contracts with multiple risk factors by neural networks

Barigou¹,

Delong²

2020

Preprint

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This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality. We price the equitylinked contracts by assuming that the insurer hedges the risks to reduce the local variance of the net asset value process and requires a compensation for the non-hedgeable part of the liability in the form of an instantaneous standard deviation risk margin. The price can then be expressed as the solution of a system of non-linear partial differential equations. We reformulate the problem as a backward stochastic differential equation with jumps and solve it numerically by the use of efficient neural networks. Sensitivity analysis is performed with respect to initial parameters and an analysis of the accuracy of the approximation of the true price with our neural networks is provided.

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Fair Valuation of Insurance Liability Cash-Flow Streams in Continuous Time: Applications

Cited by 27 publications

References 16 publications

Least Squares Monte Carlo applied to Dynamic Monetary Utility Functions

Least Squares Monte Carlo applied to Dynamic Monetary Utility Functions

Architecture and Energy Efficiency of Distributed Biomass based CCHP System based on FCF Method

Pricing equity-linked life insurance contracts with multiple risk factors by neural networks

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