Fourier based methods for the management of complex life insurance products

Ballotta, Laura; Eberlein, Ernst; Schmidt, Thorsten; Zeineddine, Raghid

doi:10.1016/j.insmatheco.2021.08.009

Cited by 4 publications

(4 citation statements)

References 54 publications

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“…Huang and Meng [34] explore the use of driving behavior variables in predicting risk probability and claim frequency in automobile insurance by using logistic regression and several machine learning techniques. In addition, Ballotta et al [35] propose a framework for valuing complex life insurance contracts with embedded options, utilizing Fourier transform methods and Monte Carlo integration.…”

Section: Methodologiesmentioning

confidence: 99%

Decoding the Profitability of Insurance Products: A Novel Approach to Evaluating Non-Participating and Participating Insurance Policies

Yang

et al. 2023

Mathematics

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This study presents a novel approach to analyzing the present value of total profit for non-participating and participating insurance policies in order to determine the optimal profitability of non-participating and participating insurance policies based on applying the approach used in operations research to the field of finance. As such, a comprehensive insurance product evaluation model was developed using both mathematical models and numerical analysis to evaluate the demand for non-participating and participating life insurance policies in response to changes in interest rates. The findings indicate that non-participating life insurance policies offer greater solvency for insurance companies compared to participating policies. The study also highlights the significance of spontaneous and induced demand in determining the total profit of both types of policies. The study concludes that life insurance companies should focus on generating spontaneous consumer demand, reducing induced demand, and implementing the optimal pricing strategy to achieve maximum profits.

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Section: Methodologiesmentioning

confidence: 99%

Decoding the Profitability of Insurance Products: A Novel Approach to Evaluating Non-Participating and Participating Insurance Policies

Yang

et al. 2023

Mathematics

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“…In Bacinello et al (2011), the authors also consider product claims and describe different choices for S f , encompassing the most common minimum death and living guarantees. Their valuation then assumes a perfectly diversified portfolio, that is, there is no risk margin in the actuarial valuation and the financial market is independent of the mortality risk, that is, Y is independent of Z and X; see also Brennan and Schwartz (1976b), Deelstra et al (2020) for the one-period case and Ballotta et al (2021), Delong et al (2019b) for the multiperiod case. Product claims with dependent financial and non-financial risks are considered in Deelstra et al (2016), Salahnejhad and Pelsser (2020), Barigou et al (2022).…”

Section: Hybrid Claimsmentioning

confidence: 99%

“…(2020) for the one-period case and Ballotta et al . (2021), Delong et al . (2019b) for the multiperiod case.…”

Section: Valuation Of Hybrid Claimsmentioning

confidence: 99%

The 3-step hedge-based valuation: fair valuation in the presence of systematic risks

Linders

2023

ASTIN Bull.

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In this paper, we introduce the 3-step hedge-based valuation for the valuation of hybrid claims. We consider an insurance portfolio which is exposed to traded risks, diversifiable risks and non-traded systematic risks. The class of 3-step hedge-based valuations is equivalent with the class of fair valuations. Closed-form solutions are derived for a portfolio of unit-linked contracts under the assumption of independence between financial and non-financial risks. We also consider the additive 3-step valuation and show that this additive valuation is a member of the more general class of 3-step hedge-based valuations.

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“…More complex payoff structures, such as for example the ones found in insurance contracts like Variable Annuities, can affect significantly the CPU time for these deterministic quadrature routines. For an illustration of this impact, we refer to Ballotta et al (2020) and Ballotta et al (2021), in which it is shown that for Variable Annuities MCi is more efficient than deterministic quadrature routines even in dimension 3. Actually, in these papers integrals up to 9 dimensions are tackled; however, due to the long maturity of insurance policies, 20 or even 30 dimensions would not be unusual.…”

mentioning

confidence: 99%