Financial Risk and Derivatives: A Special Issue of the by Henri Loubergé (auth.), Henri Loubergé, Marti G.

By Henri Loubergé (auth.), Henri Loubergé, Marti G. Subrahmanyam (eds.)

Financial probability and Derivatives presents an outstanding representation of the hyperlinks that experience constructed lately among the speculation of finance on one hand and assurance economics and actuarial technology at the different. Advances in contingent claims research and advancements within the educational and functional literature facing the administration of monetary dangers mirror the shut relationships among assurance and suggestions in finance.
The ebook represents an summary of the current cutting-edge in theoretical study facing monetary problems with importance for assurance technology. it is going to expectantly supply an impetus to additional advancements in utilized coverage research.

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Financial Risk and Derivatives: A Special Issue of the Geneva Papers on Risk and Insurance Theory

Monetary threat and Derivatives offers a superb representation of the hyperlinks that experience constructed lately among the speculation of finance on one hand and coverage economics and actuarial technology at the different. Advances in contingent claims research and advancements within the educational and functional literature facing the administration of economic dangers mirror the shut relationships among coverage and concepts in finance.

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Ji In t •- 1'1 . _ 1'2 . Ji In [S5G J+ rl t [SAGt J + + 2:1 Vy21 j ] t , rl - 2:1 Vx21j ] [S5J + rl - 2: Gt , (37) 21 t] . 3. Two-fund contracts with cap In this paragraph the benefit is similar to the previous one, but a cap has replaced the guarantee. ], Kt]. 3. The market price at time zero for the benefit C? fi [S5J + lr: - 2" . 1'3 . - t t and 1'4 . 4. Two-fund contracts with cap and guarantee The benefit is now a combination of the two previous ones, such that both a cap and guarantee are included.

4. Flexible two-fund switch-link option The remaining insurance contracts allow the insured to switch link unit by unit to another mutual fund. Assuming the mutual fund with the highest market value at the switch time T will be selected for linkage from time T onward, the benefit of the next contract is, 57 UNIT-LINKED LIFE INSURANCE CONTRACTS C A for t cl4 = { < T, sl if S; ~ S; and t ~ T, sl if S; > T. ST1 and t ~ (48) Lemma SA. 5. Flexible two-fund switch-link option with conversion option Under this contract, the insured has the right at time T to choose whether the insurance benefit should be linked to which of the two mutual funds, if any.

Several new types of unit-linked life insurance contracts are discussed, with substantial potential for real-life applications. Compared to usual unitlinked products, these contracts offer added flexibility and/or altered exposure to financial risk for the insured and/or the insurer. The single premiums of these policies are calculated as expectations under a risk-adjusted probability measure (equivalent martingale measure), satisfying no-arbitrage conditions in financial markets. Key words: unit-linked life insurance, exotic contracts, equivalent martingale measures, financial risk, insurance premiums 1.

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