We derive optimal strategies for an individual life insurance policyholder who can control the asset allocation as well as the sum insured (the amount to be paid out upon death) throughout the policy term. We first consider the problem in a pure form without constraints (except nonnegativity on...

We present an axiomatic characterization of price measures that are superadditive and comonotonic additive for normally distributed random variables. The price representation derived involves a probability measure transform that is closely related to the Esscher transform, and we call it the...

We develop a real options model of R&D valuation that takes into account the uncertainty in the quality (or efficacy) of the research output, the time and cost to completion, and the market demand for the R&D output. The model is then applied to study the problem of pharmaceutical...

This paper addresses the modelling of human mortality by the aid of doubly stochastic processes with an intensity driven by a positive Lévy process. We focus on intensities having a mean reverting stochastic component. Furthermore, driving Lévy processes are pure jump processes belonging to...

In large portfolios, the risk borne by annuity providers (insurance companies or pension funds) is basically driven by the randomness in the future mortality rates. To fix the ideas, we adopt here the standard Lee-Carter framework, where the future forces of mortality are decomposed in a...

We study indifference pricing of mortality contingent claims in a fully stochastic model. We assume both stochastic interest rates and stochastic hazard rates governing the population mortality. In this setting we compute the indifference price charged by an insurer that uses exponential utility...

In this work we deal with approximations of compound distributions, that is, distribution functions of random sums. More specifically, we obtain a discrete compound distribution by replacing each summand in the initial random sum by a discrete random variable whose probability mass function is...

In this paper we consider a multi-threshold compound Poisson risk model. A piecewise integro-differential equation is derived for the Gerber-Shiu discounted penalty function. We then provide a recursive approach to obtain general solutions to the integro-differential equation and its...

Mortality rates are known to depend on socio-economic and behavioral risk factors, and actuarial calculations for life insurance policies usually reflect this. It is typically assumed, however, that these risk factors are observed only at policy issue, and the impact of changes that occur later...

In this paper we model the claim process of financial guarantee insurance, and predict the pure premium and the required amount of risk capital. The data used are from the financial guarantee system of the Finnish statutory pension scheme. The losses in financial guarantee insurance may be...