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Market Consistent Pricing of Insurance ProductsSemyon MalamudEcole Polytechnique Federale de Lausanne and Swiss Finance Institute; Swiss Finance Institute Eugene TrubowitzSwiss Federal Institute of Technology Zurich Mario V. WuthrichETH Zurich, RiskLab, Department of Mathematics; Cass Business School, City University London March 13, 2007 Abstract: We present the first step in a program to develop a comprehensive, unified equilibrium theory of asset and liability pricing. We give a mathematical framework for pricing insurance products in a multiperiod financial market. This framework reflects classical economic principles (like utility maximization) and generates pricing algorithms for non-hedgeable insurance risks.
Number of Pages in PDF File: 32 Keywords: insurance, hedging, incomplete markets, utility indifference, market consistent JEL Classification: C00, C61, C63, D52, D81, G11, G12, G13 working papers seriesDate posted: March 15, 2007Suggested CitationContact Information
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