Market Consistent Pricing of Insurance Products

32 Pages Posted: 15 Mar 2007

See all articles by Semyon Malamud

Semyon Malamud

Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Eugene Trubowitz

Swiss Federal Institute of Technology Zurich

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: 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.

Keywords: insurance, hedging, incomplete markets, utility indifference, market consistent

JEL Classification: C00, C61, C63, D52, D81, G11, G12, G13

Suggested Citation

Malamud, Semyon and Trubowitz, Eugene and Wuthrich, Mario V., Market Consistent Pricing of Insurance Products (March 13, 2007). Available at SSRN: https://ssrn.com/abstract=970549 or http://dx.doi.org/10.2139/ssrn.970549

Semyon Malamud (Contact Author)

Ecole Polytechnique Federale de Lausanne ( email )

Lausanne, 1015
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Eugene Trubowitz

Swiss Federal Institute of Technology Zurich ( email )

Lausanne CH-1001
Switzerland

Mario V. Wuthrich

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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