Market value of life insurance contracts under stochastic interest rates and default risk [An article from: Insurance Mathematics and Economics]

This digital document is a journal article from Insurance Mathematics and Economics, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
The purpose of this article is to value some life insurance contracts in a stochastic interest rate environment taking into account the default risk of the underlying insurance company. The participating life insurance contracts considered here can be expressed as portfolios of barrier options as shown by Grosen and Jorgensen [J. Risk Insurance 64 (3) (1997) 481-503]. In order to price these options, the Longstaff and Schwartz [J. Finance 50 (3) (1995) 789-820] methodology is used with the Collin-Dufresne and Goldstein [J. Finance 56 (5) (2001) 1929-1957] correction. luing risky fixed and floating rate debt. J. Finance 50 (3), 789-820] methodology is used with the Collin-Dufresne and Goldstein [Collin-Dufresne, P., Goldstein, R., 2001. Do credit spreads reflect stationary leverage ratios? J. Finance 56 (5), 1929-1957] correction.