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Development and Pricing of a New Participating Contract

Author

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  • Carole Bernard
  • Olivier Le Courtois
  • François Quittard-Pinon

Abstract

This article designs and prices a new type of participating life insurance contract. Participating contracts are popular in the United States and European countries. They present many different covenants and depend on national regulations. In the present article we design a new type of participating contract very similar to the one considered in other studies, but with the guaranteed rate matching the return of a government bond. We prove that this new type of contract can be valued in closed form when interest rates are stochastic and when the company can default.

Suggested Citation

  • Carole Bernard & Olivier Le Courtois & François Quittard-Pinon, 2006. "Development and Pricing of a New Participating Contract," North American Actuarial Journal, Taylor & Francis Journals, vol. 10(4), pages 179-195.
    • Handle: RePEc:taf:uaajxx:v:10:y:2006:i:4:p:179-195
    DOI: 10.1080/10920277.2006.10597420
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    Cited by:

    1. Bernard, Carole & Boyle, Phelim P., 2011. "A Natural Hedge for Equity Indexed Annuities," Annals of Actuarial Science, Cambridge University Press, vol. 5(2), pages 211-230, September.
    2. 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.
    3. Bernard Carole & Le Courtois Olivier, 2012. "Asset Risk Management of Participating Contracts," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 6(2), pages 1-23, June.
    4. Chi Man Leung & Yue Kuen Kwok, 2017. "NUMERICAL PRICING OF CoCo BONDS WITH PARISIAN TRIGGER FEATURE USING THE FORTET METHOD," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(07), pages 1-22, November.
    5. An Chen & Xia Su, 2009. "Knightian uncertainty and insurance regulation decision," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 32(1), pages 13-33, May.

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