IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-81-322-0659-0_6.html
   My bibliography  Save this book chapter

Stochastic Interest Rate

In: Multiple Decrement Models in Insurance

Author

Listed:
  • Shailaja Deshmukh

    (University of Pune, Department of Statistics)

Abstract

In Chaps. 1 to 5 , it is assumed that the rate of interest in the calculations of actuarial present values is deterministic and usually constant over the period of policy. However, the assumption of deterministic interest will be rarely realized in practice, particularly for long-term policies. Chapter 6 introduces, in brief, stochastic models for interest rates and calculation of premiums for some products in this setup. In this chapter we discuss how the randomness in the interest rates is captured and how it affects the actuarial present values of cash flows. Section 6.2 discusses how different scenarios of time-varying interest rate are modeled by a random variable and how premiums can be computed under this setup. Section 6.3 discusses how to obtain the actuarial present values of cash flows if the interest rates for the period under study are assumed to be independent and identically distributed random variables. The particular case of lognormal distribution is investigated in detail. In Sect. 6.4, the assumption of independence is relaxed, and interest rates over the time period are modeled by an appropriate time series model. MA(1) model for the interest rates is studied in detail. These methods are illustrated with the corresponding R code.

Suggested Citation

  • Shailaja Deshmukh, 2012. "Stochastic Interest Rate," Springer Books, in: Multiple Decrement Models in Insurance, edition 127, chapter 0, pages 205-215, Springer.
    • Handle: RePEc:spr:sprchp:978-81-322-0659-0_6
    DOI: 10.1007/978-81-322-0659-0_6
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-81-322-0659-0_6. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.