Summary
An equity linked life and pension insurance contract consists of an nonlinear combination of a life and pension insurance with an investment strategy. In addition to the guaranteed payments the insured receives a bonus depending on the value of an investment strategy. The additional payment is similar to an Asian type option. Since the insurance contract combines mortality and financial risks in a nonlinear way, the value or premium of the contract must reflect these uncertainties. Within this context a premium sequence is called fair if the accumulated expected discounted premium is equal to the accumulated expected discounted payments of the contract. This paper shows the existence of a fair periodic premium. For two different pension policies an approximation of the fair periodic premium is derived.
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© 2002 Springer-Verlag Berlin Heidelberg
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Nielsen, J.A., Sandmanne, K. (2002). The Fair Premium of an Equity—Linked Life and Pension Insurance. In: Sandmann, K., Schönbucher, P.J. (eds) Advances in Finance and Stochastics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-04790-3_12
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DOI: https://doi.org/10.1007/978-3-662-04790-3_12
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-07792-0
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