Natural hedging in continuous time life insurance

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Standard

Natural hedging in continuous time life insurance. / Nyegaard, Anna Kamille.

I: European Actuarial Journal, Bind 13, Nr. 2, 2023, s. 497 - 515.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Nyegaard, AK 2023, 'Natural hedging in continuous time life insurance', European Actuarial Journal, bind 13, nr. 2, s. 497 - 515. https://doi.org/10.1007/s13385-022-00340-2

APA

Nyegaard, A. K. (2023). Natural hedging in continuous time life insurance. European Actuarial Journal, 13(2), 497 - 515. https://doi.org/10.1007/s13385-022-00340-2

Vancouver

Nyegaard AK. Natural hedging in continuous time life insurance. European Actuarial Journal. 2023;13(2):497 - 515. https://doi.org/10.1007/s13385-022-00340-2

Author

Nyegaard, Anna Kamille. / Natural hedging in continuous time life insurance. I: European Actuarial Journal. 2023 ; Bind 13, Nr. 2. s. 497 - 515.

Bibtex

@article{f3df56898f144d92bd4bf9437dc9ddf4,
title = "Natural hedging in continuous time life insurance",
abstract = "Life insurance companies face several types of risks including financial risks and insurance risks. Financial risks can to a large extent be hedged by trading in the financial market, but there exists no such market for insurance risks. We suggest an alternative to hedge insurance risks. In a multi-state setup in continuous time life insurance, we describe the concept of natural hedging, which enables us to compose a portfolio of different insurance products where the liabilities are unaffected by shifts in the transition intensities. We describe how to find and how to calculate the natural hedging strategy using directional derivatives (Gateaux derivatives) to measure the sensitivity of the life insurance liabilities with respect to shifts in the transition intensities of a Markov chain governing the state of the insured. Furthermore, we implement the natural hedging strategy in two numerical examples based on the survival model and the disability model, respectively.",
keywords = "Life insurance, Multi-state models, Natural hedging, Risk management",
author = "Nyegaard, {Anna Kamille}",
note = "Publisher Copyright: {\textcopyright} 2023, The Author(s), under exclusive licence to European Actuarial Journal Association.",
year = "2023",
doi = "10.1007/s13385-022-00340-2",
language = "English",
volume = "13",
pages = "497 -- 515",
journal = "European Actuarial Journal",
issn = "2190-9733",
publisher = "Springer",
number = "2",

}

RIS

TY - JOUR

T1 - Natural hedging in continuous time life insurance

AU - Nyegaard, Anna Kamille

N1 - Publisher Copyright: © 2023, The Author(s), under exclusive licence to European Actuarial Journal Association.

PY - 2023

Y1 - 2023

N2 - Life insurance companies face several types of risks including financial risks and insurance risks. Financial risks can to a large extent be hedged by trading in the financial market, but there exists no such market for insurance risks. We suggest an alternative to hedge insurance risks. In a multi-state setup in continuous time life insurance, we describe the concept of natural hedging, which enables us to compose a portfolio of different insurance products where the liabilities are unaffected by shifts in the transition intensities. We describe how to find and how to calculate the natural hedging strategy using directional derivatives (Gateaux derivatives) to measure the sensitivity of the life insurance liabilities with respect to shifts in the transition intensities of a Markov chain governing the state of the insured. Furthermore, we implement the natural hedging strategy in two numerical examples based on the survival model and the disability model, respectively.

AB - Life insurance companies face several types of risks including financial risks and insurance risks. Financial risks can to a large extent be hedged by trading in the financial market, but there exists no such market for insurance risks. We suggest an alternative to hedge insurance risks. In a multi-state setup in continuous time life insurance, we describe the concept of natural hedging, which enables us to compose a portfolio of different insurance products where the liabilities are unaffected by shifts in the transition intensities. We describe how to find and how to calculate the natural hedging strategy using directional derivatives (Gateaux derivatives) to measure the sensitivity of the life insurance liabilities with respect to shifts in the transition intensities of a Markov chain governing the state of the insured. Furthermore, we implement the natural hedging strategy in two numerical examples based on the survival model and the disability model, respectively.

KW - Life insurance

KW - Multi-state models

KW - Natural hedging

KW - Risk management

U2 - 10.1007/s13385-022-00340-2

DO - 10.1007/s13385-022-00340-2

M3 - Journal article

AN - SCOPUS:85145902080

VL - 13

SP - 497

EP - 515

JO - European Actuarial Journal

JF - European Actuarial Journal

SN - 2190-9733

IS - 2

ER -

ID: 370572410