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Life Insurance Cash Flows with Policyholder Behavior

Listed author(s):
  • Kristian Buchardt

    ()

    (PFA Pension, Sundkrogsgade 4, DK-2100 Copenhagen Ø, Denmark
    Department of Mathematical Sciences, University of Copenhagen, Universitetsparken 5, DK-2100 Copenhagen Ø, Denmark)

  • Thomas Møller

    ()

    (PFA Pension, Sundkrogsgade 4, DK-2100 Copenhagen Ø, Denmark
    Department of Mathematical Sciences, University of Copenhagen, Universitetsparken 5, DK-2100 Copenhagen Ø, Denmark)

Registered author(s):

    The problem of the valuation of life insurance payments with policyholder behavior is studied. First, a simple survival model is considered, and it is shown how cash flows without policyholder behavior can be modified to include surrender and free policy behavior by calculation of simple integrals. In the second part, a more general disability model with recovery is studied. Here, cash flows are determined by solving a modified Kolmogorov forward differential equation. We conclude the paper with numerical examples illustrating the methods proposed and the impact of policyholder behavior.

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    File URL: http://www.mdpi.com/2227-9091/3/3/290/pdf
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    Article provided by MDPI, Open Access Journal in its journal Risks.

    Volume (Year): 3 (2015)
    Issue (Month): 3 (July)
    Pages: 1-28

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    Handle: RePEc:gam:jrisks:v:3:y:2015:i:3:p:290-317:d:53175
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    1. Buchardt, Kristian, 2014. "Dependent interest and transition rates in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 167-179.
    2. Steffensen, Mogens, 2002. "Intervention options in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 31(1), pages 71-85, August.
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