Jump diffusion transition intensities in life insurance and disability annuity

Jiwook Jang, Siti Norafidah Mohd Ramli*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We study the effects of jump diffusion transition intensities on a life insurance and disability annuity. To do so, we use a multi-states Markov chain with multiple decrement. Assuming independent statewise intensities, we evaluate the prospective reserve for this scheme where the insured life is in Active or Disabled state at inception, respectively. We also examine the components of the prospective reserves by changing the relevant parameters of the transition intensities, which are the jump size, the average frequency of jumps as well as the diffusion parameters, assuming deterministic rate of interest. The computation of the reserve sensitivity with their figures are provided.

Original languageEnglish
Pages (from-to)440-451
Number of pages12
JournalInsurance: Mathematics and Economics
Volume64
DOIs
Publication statusPublished - 1 Sep 2015

Keywords

  • Cox process
  • Hierarchical Markov model
  • Jump diffusion process
  • Mortality and morbidity rate
  • Term insurance and disability annuity

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