Actuarial risk management of investment guarantees in life insurance

[摘要] Investment guarantees in life insurance business have generated a lot of research in recent yearsdue to the earlier mispricing of such products. These guarantees generally take the form of exoticoptions and are therefore difficult to price analytically, even in a simplified setting. A possiblesolution to the risk management problem of investment guarantees contingent on death andsurvival is proposed through the use of a conditional lower bound approximation of the correspondingembedded option value. The derivation of the conditional lower bound approximationis outlined in the case of regular premiums with asset-based charges and the implementation isillustrated in a Black-Scheles-Merton setting. The derived conditional lower bound approximationalso facilitates verifying economic scenario generator based pricing and valuation, as well assensitivity measures for hedging solutions.

[发布机构] University of the Free State