Hedging of unit-linked life insurance contracts with unobservable mortality hazard rate via local risk-minimization

DOI10.1016/J.INSMATHECO.2014.10.013MaRDI QIDQ2260945zbMATH OpenOpenAlexFDO

Authors Claudia Ceci, Katia Colaneri, Alessandra Cretarola

Publication date 13 March 2015

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1406.6902

zbMATH Keywords

filteringpartial informationMarkovian modelsminimal martingale measurelocal risk-minimizationunit-linked life insurance contractsFöllmer-Schweizer decomposition

Mathematics Subject Classification ID

Point processes (e.g., Poisson, Cox, Hawkes processes) (60G55) Signal detection and filtering (aspects of stochastic processes) (60G35) Continuous-time Markov processes on general state spaces (60J25)

Abstract: In this paper we investigate the local risk-minimization approach for a combined financial-insurance model where there are restrictions on the information available to the insurance company. In particular we assume that, at any time, the insurance company may observe the number of deaths from a specific portfolio of insured individuals but not the mortality hazard rate. We consider a financial market driven by a general semimartingale and we aim to hedge unit-linked life insurance contracts via the local risk-minimization approach under partial information. The F"ollmer-Schweizer decomposition of the insurance claim and explicit formulas for the optimal strategy for pure endowment and term insurance contracts are provided in terms of the projection of the survival process on the information flow. Moreover, in a Markovian framework, we reduce to solve a filtering problem with point process observations.

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Cited in

(12)

• Value adjustments and dynamic hedging of reinsurance counterparty risk
• Discrete-time local risk minimization of payment processes and applications to equity-linked life-insurance contracts
• A locally risk-minimizing hedging strategy for unit-linked life insurance contracts in a Lévy process financial market
• Classical solutions of the backward PIDE for Markov modulated marked point processes and applications to CAT bonds
• A benchmark approach to risk-minimization under partial information
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• Unit-linked life insurance policies: optimal hedging in partially observable market models
• Pricing guaranteed annuity options in a linear-rational Wishart mortality model
• Optimal investment and consumption strategies for pooled annuity with partial information
• Hedging strategy for unit-linked life insurance contracts with self-exciting jump clustering
• The uncertain mortality intensity framework: pricing and hedging unit-linked life insurance contracts
• Indifference pricing of pure endowments via BSDEs under partial information

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