Stochastic Retirement in Life Insurance

Specialeforsvar ved Nikolaj Bøjer Andreasen

Titel: Stochastic Retirement in Life Insurance

 

Abstract: This project considers the problem of stochastic retirement with lump-sum probabilities of retirement added at specific ages. We extend our understanding of well-known results such as Thiele's- and Kolmogorov's differential equations. To do so we introduce the notion of the hazard function, which enables the option of adding discrete probability to a survival function. We derive results on transition probabilities and reserves in an arbitrarily large life insurance model using the augmented survival functions. Finally, we introduce a simple active-death-retirement model in which the theory of the first chapters is concretized. The project is concluded with a numerical implementation and analysis of this simple model. We find that stochastic retirement, in general, has an impact on cash flows and market values. Furthermore, changing only the lump-sum probabilities of retirement also affects these quantities.

 

  

Vejleder: Jesper Lund Pedersen
Censor:   Jesper Olesen, Danica Pension