Valuation of the Minimum Guaranteed Return Embedded in Life Insurance Products

Journal Of Risk And Insurance, Vol. 64, No. 4, December, 1997

Posted: 4 May 1998

See all articles by Svein-Arne Persson

Svein-Arne Persson

Norwegian School of Economics (NHH)

Knut K. Aase

Norwegian School of Economics (NHH) - Department of Business and Management Science

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Abstract

In many countries, traditional life insurance products include a fixed percentage guarantee on each year's return. This article presents a model for the valuation of life insurance contracts including a guaranteed minimum return. The model is based on the notion of no arbitrage opportunities from the theories of financial economics and results in some closed-form solutions for market values of different guarantees. Numerical examples indicate that these guarantees may have substantial market values.

JEL Classification: G12

Suggested Citation

Persson, Svein-Arne and Aase, Knut K., Valuation of the Minimum Guaranteed Return Embedded in Life Insurance Products. Journal Of Risk And Insurance, Vol. 64, No. 4, December, 1997. Available at SSRN: https://ssrn.com/abstract=83451

Svein-Arne Persson (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
47-55-95-90-00 (Phone)
47-55-95-96-47 (Fax)

Knut K. Aase

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

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