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Hedging unit‐linked life insurance contracts in a financial market driven by shot‐noise processes

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  • Junna Bi
  • Junyi Guo

Abstract

We consider the risk‐minimizing hedging problem for unit‐linked life insurance in a financial market driven by a shot‐noise process. Because the financial market is incomplete, the insurance claims cannot be hedged completely by trading stocks and bonds only, leaving some risk to the insurer. The theory of ((pseudo) locally) risk‐minimization is applied after a change of measure. Then the risk‐minimizing trading strategies and the associated intrinsic risk processes are determined for two types of unit‐linked contracts represented by the pure endowment and the term insurance. Copyright © 2009 John Wiley & Sons, Ltd.

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  • Junna Bi & Junyi Guo, 2010. "Hedging unit‐linked life insurance contracts in a financial market driven by shot‐noise processes," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 26(5), pages 609-623, September.
    • Handle: RePEc:wly:apsmbi:v:26:y:2010:i:5:p:609-623
    DOI: 10.1002/asmb.807
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    Cited by:

    1. Liang, Xiaoqing & Lu, Yi, 2017. "Indifference pricing of a life insurance portfolio with risky asset driven by a shot-noise process," Insurance: Mathematics and Economics, Elsevier, vol. 77(C), pages 119-132.

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