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Time-Consistent Actuarial Valuations

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  • Antoon Pelsser

Abstract

Recent theoretical results establish that time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial premium principles when such backward iteration procedures are applied. We show that the one-period variance premiumprinciple converges to the non-linear exponential indifference valuation. Furthermore, we study the convergence of the one-period standard-deviation principle and establish that the Cost-of-Capital principle, which is widely used by the insurance industry, converges to the same limit as the standard-deviation principle. Finally, we study the connections between our time-consistent pricing operators, Good Deal Bound pricing and pricing under model ambiguity.

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File URL: http://arxiv.org/pdf/1109.1751
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Paper provided by arXiv.org in its series Papers with number 1109.1751.

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Date of creation: Sep 2011
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Handle: RePEc:arx:papers:1109.1751

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Web page: http://arxiv.org/

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  9. A. Jobert & L. C. G. Rogers, 2007. "Valuations and dynamic convex risk measures," Papers 0709.0232, arXiv.org.
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