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Modelling the Surrender Conditions in Equity-Linked Life Insurance

Listed author(s):
  • Anna Rita Bacinello


    (Dipartimento di Matematica Applicata alle Scienze Economiche, Statistiche ed Attuariali, University of Trieste)

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    We propose a model for pricing a unit-linked life insurance policy embedding a surrender option. We consider both single and annual premium contracts. First we analyse a quite general contract, for which we obtain a backward recursive valuation formula based on the Cox, Ross and Rubinstein (1979) binomial model. Then we concentrate upon a particular case, that is the famous model with exogenous minimum guarantees. In this case we extend our previous analysis in order to take into account the possibility that the guarantees at death or maturity and the surrender values are endogenously determined, and provide necessary and sucient conditions for the premiums to be well defined.

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    File Function: First version, 2005
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    Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 39.

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    Length: 36 pages
    Date of creation: Feb 2005
    Handle: RePEc:crp:wpaper:39
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