IDEAS home Printed from
   My bibliography  Save this paper

Financial engineering methods in insurance


  • Jan Iwanik


The aim of this Ph.D. thesis is to apply specific statistical tools known and used in finance and risk management to the area of actuarial mathematics. The need for an interdisciplinary approach in both actuarial world and risk management has emerged and has recently been addressed by numerous publications as well as in scientific and professional events and meetings within the actuarial world. This approach is a must in a sophisticated market with complex financial instruments. Examples of such an approach include equity-linked life insurance contracts, options on mortality, and attempts to implement methodologies like Risk Adjusted Return on Capital as a principal pricing rule by more and more insurance companies. There is an ongoing effort in finance and in actuarial science to learn and integrate the statistical and mathematical tools used by the two traditional streams into a single, commonly applicable, toolbox. In this paper I want to explore two such paths. The first is the concept of failure probability that can be used as a base model for future returns in the insurance line of business. The second is an attempt to use option pricing techniques to hedge a portfolio of life insurance contracts against systematic mortality risk.

Suggested Citation

  • Jan Iwanik, 2006. "Financial engineering methods in insurance," HSC Research Reports HSC/06/02, Hugo Steinhaus Center, Wroclaw University of Technology.
  • Handle: RePEc:wuu:wpaper:hsc0602

    Download full text from publisher

    File URL:
    File Function: Final version, May 2006
    Download Restriction: no

    References listed on IDEAS

    1. De Vylder, F. & Goovaerts, M. J., 1988. "Recursive calculation of finite-time ruin probabilities," Insurance: Mathematics and Economics, Elsevier, vol. 7(1), pages 1-7, January.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Risk theory; Insurance; Option pricing; Mortality option; Failure probability;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies


    Access and download statistics


    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:wuu:wpaper:hsc0602. 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: (Rafal Weron). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.