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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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  • Antoon Pelsser, 2011. "Time-Consistent Actuarial Valuations," Papers 1109.1751, arXiv.org.
  • Handle: RePEc:arx:papers:1109.1751
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    1. repec:eee:insuma:v:74:y:2017:i:c:p:20-30 is not listed on IDEAS
    2. Dhaene, Jan & Stassen, Ben & Barigou, Karim & Linders, Daniël & Chen, Ze, 2017. "Fair valuation of insurance liabilities: Merging actuarial judgement and market-consistency," Insurance: Mathematics and Economics, Elsevier, vol. 76(C), pages 14-27.

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