Improving risk neutral valuation techniques with applications in insurance

Improving risk neutral valuation techniques with applications in insurance

Singor, S.N. (TU Delft Numerical Analysis)

Oosterlee, C.W. (promotor)

Delft University of Technology

2017-11-20

In times of market turmoil volatility increases and stock values and interest rates decrease, so that the risks in the balance sheets of insurance companies increase. An important part of these risks is due to the guarantees that are embedded in insurance policies. Life insurers sell products like unit-linked, profit sharing and variable annuity products. These contracts contain guarantees to the policyholders. Such contracts embedded in the insurers’ liabilities are called embedded options.
The value and cash flow of these contracts are respectively relevant for the balance sheet and the profit and loss account. Typically in periods of volatile markets, the value of these embedded options increase, so that the insurance company must hold a larger liability value on the balance sheet in order to be able to pay out future cash flows. The valuation of these embedded options in insurance liabilities is therefore important to insurers for risk management applications. In this thesis we consider various topics regarding the valuation of these embedded options.

https://doi.org/10.4233/uuid:c70c38c8-af5f-4454-a612-38b92c773ea2

978-90-9030645-2

Institutional Repository

doctoral thesis

© 2017 S.N. Singor