Pricing Of Unemployment Insurance Products With Doubly Stochastic Markov Chains
This paper provides a new approach for modeling and calculating premiums for unemployment insurance products. The innovative modeling concept consists of combining the benchmark approach with its real-world pricing formula and Markov chain techniques in a doubly stochastic setting. We describe individual insurance claims based on a special type of unemployment insurance contracts, which are offered on the private insurance market. The pricing formulas are first given in a general setting and then specified under the assumption that the individual employment-unemployment process of an employee follows a time-homogeneous doubly stochastic Markov chain. In this framework, formulas for the premiums are provided depending on the ℙ-numéraire portfolio of the benchmark approach. Under a simple assumption on the ℙ-numéraire portfolio, the model is tested on its sensitivities to several parameters. With the same specification the model's employment and unemployment intensities are estimated on public data of the Federal Employment Office in Germany.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 15 (2012)
Issue (Month): 04 ()
|Contact details of provider:|| Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml|
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert C. Merton, 1973.
"Theory of Rational Option Pricing,"
Bell Journal of Economics,
The RAND Corporation, vol. 4(1), pages 141-183, Spring.
- Eckhard Platen, 2006.
"A Benchmark Approach To Finance,"
Wiley Blackwell, vol. 16(1), pages 131-151.
- Delbaen, F. & Haezendonck, J., 1989. "A martingale approach to premium calculation principles in an arbitrage free market," Insurance: Mathematics and Economics, Elsevier, vol. 8(4), pages 269-277, December.
- Eckhard Platen, 2003.
"A Benchmark Framework for Risk Management,"
Research Paper Series
113, Quantitative Finance Research Centre, University of Technology, Sydney.
- Dirk Becherer, 2001. "The numeraire portfolio for unbounded semimartingales," Finance and Stochastics, Springer, vol. 5(3), pages 327-341.
- Francesca Biagini & Alessandra Cretarola & Eckhard Platen, 2012.
"Local Risk-Minimization under the Benchmark Approach,"
- Francesca Biagini & Alessandra Cretarola & Eckhard Platen, 2012. "Local Risk-Minimization under the Benchmark Approach," Research Paper Series 319, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen, 2004.
"Diversified Portfolios with Jumps in a Benchmark Framework,"
Research Paper Series
129, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 11(1), pages 1-22, March.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Sondermann, Dieter, 1991. "Reinsurance in arbitrage-free markets," Insurance: Mathematics and Economics, Elsevier, vol. 10(3), pages 191-202, December.
- Hardy Hulley & Martin Schweizer, 2010. "M6 - On Minimal Market Models and Minimal Martingale Measures," Research Paper Series 280, Quantitative Finance Research Centre, University of Technology, Sydney.
When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:15:y:2012:i:04:p:1250025-1-1250025-32. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.