Advances and Applications in Discrete Mathematics
Volume 13, Issue 1, Pages 29 - 41
(January 2014)
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ACTUARIAL PRESENT VALUE OF LIFE INSURANCE UNDER STOCHASTIC DISCOUNT INTEREST DRIVEN BY MARKOVIAN SWITCHING PROCESS
Xia Zhao
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Abstract: We consider the actuarial present value (APV in short) of life insurance under stochastic discount interest driven by Markovian switching process. Different from Perry et al. [19] and Norberg [16], no prior distribution of lifetime was assumed and perturbation methodology is employed to model stochastic interest here. We obtain the differential equations satisfied by APVs of whole life insurance with payment at the instant of death. And some interesting corollaries are also obtained. |
Keywords and phrases: actuarial present value (APV), Markovian switching process, stochastic interest, perturbation methodology. |
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