Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/198427
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- Title
- Pricing of RCLA contract in incomplete market : PIDE approach
- Related
- Higher Degree Research Expo (7th : 2011) (10 - 11 October 2011 : Sydney)
- Related
- Expo 2011 Higher Degree Research : book of abstracts, p.79-80
- Related
- http://www.businessandeconomics.mq.edu.au/research_expo/2011
- Publisher
- North Ryde, N.S.W : Faculty of Business and Economics, Macquarie University
- Date
- 2011
- Author/Creator
- Rong, Ning
- Description
- Purpose: The purpose of this project is to implement the finite difference method into the pricing of the equity-linked insurance product in the incomplete market. Besides the Brownian motion, I included two extra risk terms, namely jumps and stochastic volatilities. Accordingly, the general two dimensional finite difference method for solving pricing PDE is extended to three-dimensions, and extra integral component is added to capture the possible jump in the process of risky asset. Originality: It is the first study to use the three dimensional PIDE as the tool for pricing RCLA contract in the incomplete market. Design/methodology/approach: By introducing the concept of RCLA contact, then I derive the risky asset process in the equivalent martingale measure, and further compute the corresponding PIDE in the Matlab. Findings: By expanding the number of sources of risks in the asset process which will lead to more accuracy price of RCLA contract. Research limitations/implications: The limitation is that using PIDE may sometimes lead to convergence problem. Practical and Social implications: Providing the guidance to insurance companies or investment banks that are looking for the general pricing formula for the equity-linked securities.
- Description
- 2 page(s)
- Subject Keyword
- RCLA
- Subject Keyword
- Equivalent Martingale Measure
- Subject Keyword
- Stochastic Volatility
- Subject Keyword
- Jump
- Subject Keyword
- PIDE
- Resource Type
- conference paper abstract
- Organisation
- Macquarie University. Dept. of Economics
- Identifier
- http://hdl.handle.net/1959.14/198427
- Identifier
- ISSN:1837-9214
- Identifier
- mq_res-ext-201210311327-42
- Language
- eng
