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arXiv · 1707.01028

Multi-state models for evaluating conversion options in life insurance

Guglielmo D'Amico·Montserrat Guillen·Raimondo Manca·Filippo Petroni
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Abstract

In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the valuation of the option such as the duration problem, the time non-homogeneity and the ageing effect. The value of the conversion option is evaluated after the formal description of this contract.

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Guglielmo D'Amico, Montserrat Guillen, Raimondo Manca, Filippo Petroni. 2017-07-03. Multi-state models for evaluating conversion options in life insurance. https://doi.org/10.15559/17-vmsta78

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