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arXiv · 1602.07910

Polynomial Diffusion Models for Life Insurance Liabilities

Francesca Biagini·Yinglin Zhang
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Abstract

In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a compact state space. Such a model guarantees not only the positivity of the OIS short rate and the mortality intensity, but also the possibility of approximating both pricing formula and hedging strategy of a large class of life insurance products by explicit formulas.

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BibTeXRIS

Francesca Biagini, Yinglin Zhang. 2016-02-25. Polynomial Diffusion Models for Life Insurance Liabilities. https://doi.org/10.1016/j.insmatheco.2016.08.008

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