Market Consistent Pricing of Insurance Products
32 Pages Posted: 15 Mar 2007
Date Written: March 13, 2007
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
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