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Two Stochastic Approaches for Discounting Actuarial Functions

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  • Parker, Gary

Abstract

Two approaches used to model interest randomness are presented. They are the modeling of the force of interest accumulation function and the modeling of the force of interest. The expected value, standard deviation and coefficient of skewness of the present value of annuities-immediate are presented as illustrations. The implicit behavior of the force of interest under the two approaches is investigated by looking at a particular conditional expectation of the force of interest accumulation function.

Suggested Citation

  • Parker, Gary, 1994. "Two Stochastic Approaches for Discounting Actuarial Functions," ASTIN Bulletin, Cambridge University Press, vol. 24(2), pages 167-181, November.
    • Handle: RePEc:cup:astinb:v:24:y:1994:i:02:p:167-181_00
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    Cited by:

    1. De Schepper, Ann & Goovaerts, Marc & Dhaene, Jan & Kaas, Rob & Vyncke, David, 2002. "Bounds for present value functions with stochastic interest rates and stochastic volatility," Insurance: Mathematics and Economics, Elsevier, vol. 31(1), pages 87-103, August.
    2. Koch, Inge & Schepper, Ann De, 2007. "An application of comonotonicity and convex ordering to present values with truncated stochastic interest rates," Insurance: Mathematics and Economics, Elsevier, vol. 40(3), pages 386-402, May.
    3. Marcus C. Christiansen, 2013. "Gaussian and Affine Approximation of Stochastic Diffusion Models for Interest and Mortality Rates," Risks, MDPI, vol. 1(3), pages 1-20, October.
    4. Wang, Nan & Gerrard, Russell & Haberman, Steven, 2004. "The premium and the risk of a life policy in the presence of interest rate fluctuations," Insurance: Mathematics and Economics, Elsevier, vol. 35(3), pages 537-551, December.
    5. Parker, Gary, 1995. "A second order stochastic differential equation for the force of interest," Insurance: Mathematics and Economics, Elsevier, vol. 16(3), pages 211-224, July.
    6. Hoedemakers, Tom & Darkiewicz, Grzegorz & Goovaerts, Marc, 2005. "Approximations for life annuity contracts in a stochastic financial environment," Insurance: Mathematics and Economics, Elsevier, vol. 37(2), pages 239-269, October.

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