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Equilibrium Prices Of Guarantees Under Unit-Linked Life Insurance Contracts

Author

Listed:
  • Diana-Maria Chis
  • Cristina Ciumas
  • Emilia-Anuta Corovei

Abstract

The guarantee under a unit-linked contract can be viewed as an option exercisable at the maturity date entitling the policyholder to the greater of the value of the units or the guaranteed amount. The principles of the Option Pricing Model were employed to derive the equilibrium premium for both a single-premium contract and a periodic-premium contract and some numerical simulation were presented. The aim of this study is to determine the equilibrium values of guarantees on single premium contracts and regular premium contracts. Also this research prescribes an optimal investment policy for the insurance company selling these policies.

Suggested Citation

  • Diana-Maria Chis & Cristina Ciumas & Emilia-Anuta Corovei, 2017. "Equilibrium Prices Of Guarantees Under Unit-Linked Life Insurance Contracts," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 9(2), pages 47-53, June.
    • Handle: RePEc:khe:journl:v:9:y:2017:i:2:p:47-53
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    More about this item

    Keywords

    Investment strategies; Investment guarantees; BlackScholes-Merton Model; Theory of options; Equilibrium prices;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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