Valuation of contingent claims with mortality and interest rate risks

A General Framework for Modelling Mortality to Better Estimate Its Relationship with Interest Rate Risks

“…Following the modelling framework of [4] and the analytical studies of Luciano and Vigna [12,13] (2005 and 2008) aiming at the selection of the most appropriate affine process to describe the death intensity of individuals, Jalen and Mamon (2009) [11] were among the first to introduce a pricing framework in which the dependence between mortality and interest risks is explicitly modeled. The topic was deepened in Liu et al (2014) [22] , where affine processes were used for pricing Guaranteed Annuity Options (GAO).…”

A linear algebraic method for pricing temporary life annuities and insurance policies

“…Lin & Cox (2005) and Gaillardetz (2008) valued life insurance products under stochastic interest rates in a discrete time set-up. Jalen & Mamon (2009) employed the change of reference probability technique together with the Bayes' rule for conditional expectations to price life insurance contracts under stochastic mortality and interest rates assumed not independent of each other. The problem of hedging insurance derivatives is discussed in Milevsky & Promislow (2001) who argued the possibility of hedging the risks due to interest rates as well as mortality by using a replicating portfolio involving insurance contracts, annuities and default-free bonds.…”

CVaR hedging under stochastic interest rate

“…It is well known that in a no-arbitrage world there exists an explicit relationship between the drift and volatility of the forward-rate dynamics, thus forward price valuing can be done from the knowledge of the volatility process and the initial rate. Much of the existing literature pays attention to the application of stochastic interest rate models, for example, Ciurlia and Gheno [9] and Jalen and Mamon [10]. Gao et al [11] studies quantile hedging of life insurance contracts with stochastic interest rate setting.…”