| Title | Stochastic analysis of life insurance surplus |
| Publication Type | Journal Article |
| Year of Publication | 2014 |
| Authors | Nolde, N, Parker, G |
| Journal | INSURANCE MATHEMATICS & ECONOMICS |
| Volume | 56 |
| Pagination | 1-13 |
| Date Published | MAY |
| Type of Article | Article |
| ISSN | 0167-6687 |
| Keywords | AR(1) process, Distribution function, Insurance surplus, Stochastic rates of return |
| Abstract | The aim of the paper is to examine the behavior of insurance surplus over time for a portfolio of homogeneous life policies. We distinguish between stochastic and accounting surpluses and derive their first two moments. A recursive formula is proposed for calculating the distribution function of the accounting surplus. We then examine the probability that the accounting surplus becomes negative in a given insurance year. Numerical examples illustrate the results for portfolios of temporary and endowment life policies assuming a conditional AR(1) process for the rates of return. (C) 2014 Elsevier B.V. All rights reserved. |
| DOI | 10.1016/j.insmatheco.2014.02.006 |
