Equity--Linked Life Insurances on Maximum of Several Assets

Abstract

This paper presents pricing and hedging methods for segregated funds and unit-linked life insurance products that are based on a Bayesian Markov-Switching Vector Autoregressive (MS-VAR) process. Here we assumed that a regime-switching process is generated by a homogeneous Markov process. An advantage of our model is it depends on economic variables and not complicated.