On fair valuation of participating life insurance policies with regime switching | Macquarie University ResearchOnline

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Title: On fair valuation of participating life insurance policies with regime switching
Related: Mamon, Rogemar S. and Elliot, Robert J.. Hidden Markov models in finance, p.31-43
DOI: 10.1007/0-387-71163-5_3
Related: International series in operations research & management science 104
Publisher: New York : Springer
Date: 2007
Author/Creator: Siu, Tak Kuen
Description: We consider the valuation of participating life insurance policies using a regime-switching Esscher transform developed in Elliott, Chan and Siu (2005) when the market values of the reference asset are driven by a Markov-modulated geometric Brownian motion (GBM). We employ the Markov-modulated GBM driven by a continuous-time hidden Markov chain model to describe the impact of the switching behavior of the states of economy on the price dynamics of the reference asset. We also explore the change of measures technique to reduce the dimension of the valuation problem.
Subject Keyword: participating policies
Subject Keyword: hidden Markov chain model
Subject Keyword: regime-switching Esscher transform
Resource Type: book chapter
Organisation: Macquarie University. Dept. of Actuarial Studies

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