A FRAMEWORK TO CHARGE FOR UNIT-LINKED CONTRACTS WHEN CONSIDERING GUARANTEED RISK
Journal Title: Asian Economic and Financial Review - Year 2015, Vol 5, Issue 3
Abstract
Risk management for investment guarantees with unit-linked contracts is very critical for the insurer. This paper proposes a framework to charge for guaranteed risk when the insurer reserves for the guaranteed risk. This framework can facilitate the calculation of risk reserves and charge for the investment guarantees. In this framework the charge is determined by two criteria of meeting the insurance company?s target internal rate of return and simultaneously the reserving standard. The framework is built on the stochastic cash-flow analysis. For illustrative purposes, we set up quantile reserves as the actuarial reserving standard in our framework. In this framework, the procedure to work out the charges is in reverse. In our numerical illustration, we investigate a unit-linked policy with maturity guarantees. Our framework would also apply to other types of contacts, guarantees and reserving standard.
Authors and Affiliations
Lee, Yung-Tsung| Assistant Professor, Department of Banking and Finance, National Chiayi University, Chiayi, Taiwan
Keywords
Related Articles
- EP ID EP2182
- DOI -
- Views 417
- Downloads 36
FINANCIAL DEVELOPMENT AND INVESTMENT AMOUNT NEXUS: A CASE STUDY OF TURKEY
The paper examines the relationship between financial development and investment amount in Turkey over the period of 1998:01-2015:02 by using Toda-Yamamoto method. Banking sector and stock market measures of financial de...
GOVERNANCE, OWNERSHIP STRUCTURE AND REPORTING FEATURES: THE CASE STUDY OF AN ITALIAN SOCIAL COOPERATIVE NETWORK
The diffusion and the consolidation of the experiences and the realities of the third sector were determined during the ?80s and ?90s, in concomitance with the reflection and the reorganization of the social politics, or...
SUGGEST SOLUTIONS FOR DIFFUSION AND IMPLEMENTATION OF ACTIVITY-BASED COSTING IN VIETNAM
Activity-Based Costing (ABC) was developed by Robert S. Kaplan in the mid-1980s and up to now the academics, researchers as well as accounting practitioners have perceived it as the normative appropriate cost system. It...
CANONICAL COALITION GAME THEORY FOR OPTIMAL PORTFOLIO SELECTION
Special mathematical techniques have been developed in order to analyze conflict-competition situations. Game theory provides a formal analytical framework with a set of mathematical tools to study the complex intersecti...
THE FISHER EFFECT IN THE SPANISH CASE: A PRELIMINARY STUDY
We revise previous literature about Fisher Effect, in order to check if the majority of nominal interest rates movements are caused by inflation rate fluctuations, remaining constant the real interest rate. Finally, we a...