Markov models and Thiele's integral equations for the prospective reserve (Q1381150): Difference between revisions

Extending previous results of J.M. Hoem and R. Norberg concerning the Thiele's differential and integral equations for prospective reserve, the authors propose a mathematical framework for the insurance of persons, which jointly comprises the ``discrete method'' and the ``continuous method'' of insurance mathematics as well as intermediate cases. The main tool for modelling the policy development is the theory of Markov jump processes based on cumulative transition intensities. Relaxing different restrictions connected with the Thiele's differential equations, a new version of Thiele's integral equations is derived. The uniqueness of their solution is proved, and the relation to two types of backward integral equations known from the theory of Markovian jump processes, the recursion formulae for the prospective reserve in discrete situations and other applications are obtained. The possibility of relaxing the requirements imposed on the Markovian jump process with piecewise continuous transition intensities is considered. Using the obtained Thiele's integral equations, the well-known Cantelli theorem is generalized. To illustrate some basic ideas a number of examples are given.