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Abstract
We consider the problem of computing risk measures in a life insurance context by means of a lattice-based approach. The main advantage of the proposed model relies on the fact that the dynamics of the risk factors may be approximated by a unique lattice along the whole time horizon, thus guaranteeing the same computational cost of a standard pricing problem. This allows us to develop an efficient model that computes accurate estimates of the considered risk measures.
TOPICS: Risk management, derivatives, options, equity portfolio management
Key Findings
▪ This article shows how lattice-based models can be used to evaluate risk measures of life insurance contract.
▪ A bivariate lattice is constructed to approximate the loss function of an equity-linked policy with or without mortality risk.
▪ Numerical results show that the model computes accurate Value at Risk and Conditional Value at Risk values in all the considered cases.
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Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600