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Pricing Participating Products under a Generalized Jump-Diffusion Model

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  • Tak Kuen Siu
  • John W. Lau
  • Hailiang Yang

Abstract

We propose a model for valuing participating life insurance products under a generalized jump-diffusion model with a Markov-switching compensator. It also nests a number of important and popular models in finance, including the classes of jump-diffusion models and Markovian regime-switching models. The Esscher transform is employed to determine an equivalent martingale measure. Simulation experiments are conducted to illustrate the practical implementation of the model and to highlight some features that can be obtained from our model.

Suggested Citation

  • Tak Kuen Siu & John W. Lau & Hailiang Yang, 2008. "Pricing Participating Products under a Generalized Jump-Diffusion Model," International Journal of Stochastic Analysis, Hindawi, vol. 2008, pages 1-30, July.
    • Handle: RePEc:hin:jnijsa:474623
    DOI: 10.1155/2008/474623
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    Cited by:

    1. Olivier Le Courtois & François Quittard-Pinon & Xiaoshan Su, 2020. "Pricing and hedging defaultable participating contracts with regime switching and jump risk," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(1), pages 303-339, June.

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