IDEAS home Printed from https://ideas.repec.org/p/aiz/louvad/2023023.html
   My bibliography  Save this paper

Hybrid life insurance valuation based on a new standard deviation premium principle in a stochastic interest rate framework

Author

Listed:
  • Belhouari, Oussama

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

  • Deelstra, Griselda

    (Université Libre de Bruxelles)

  • Devolder, Pierre

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

Abstract

In a complete arbitrage-free financial market, financial products are valued with the risk-neutral measure and these products are completely hedgeable. In life insurance, the approach is different as the valuation is based on an insurance premium principle which includes a safety loading. The insurer reduces the risk by pooling a vast number of independent risks. In our framework, we suggest valuations of a class of products that are dependent on both mortality and financial risk, namely hybrid life products. The main contribution of this paper is to present a generalized standard deviation premium principle in a stochastic interest rate framework, and to integrate it in different valuation operators suggested in the literature. We illustrate our methods with a classical application, namely a Pure Endowment with profit. Several numerical results are presented, and an extensive sensitivity analysis is included.

Suggested Citation

  • Belhouari, Oussama & Deelstra, Griselda & Devolder, Pierre, 2023. "Hybrid life insurance valuation based on a new standard deviation premium principle in a stochastic interest rate framework," LIDAM Discussion Papers ISBA 2023023, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvad:2023023
    as

    Download full text from publisher

    File URL: https://dial.uclouvain.be/pr/boreal/en/object/boreal%3A275602/datastream/PDF_01/view
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Financial risk ; actuarial risk ; hybrid products ; fair valuation ; risk decomposition;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aiz:louvad:2023023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nadja Peiffer (email available below). General contact details of provider: https://edirc.repec.org/data/isuclbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.