Quantile hedging on equity-linked life insurance contracts with transaction costs

Quantile hedging for equity-linked life insurance contracts in a stochastic interest rate economy

Quantile hedging for equity-linked contracts

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We provide best strategy for an insurance company assuming the limited capital for the hedging.

Optimal Hedging and Pricing of Equity-LinkedLife Insurance Contracts in a Discrete-Time Incomplete Market

We present a method of optimal hedging and pricing of equity-linked life insurance products in an incomplete discrete-time financial market. A pure endowment life insurance contract with guarantee is used as an example. The financial market incompleteness is caused by the assumption that the underlying risky asset price ratios are distributed in a compact interval, generalizing the assumptions ...

Optimal hedging strategies for multi-period guarantees in the presence of transaction costs: A stochastic programming approach

Multi-period guarantees are often embedded in life insurance contracts. In this paper we consider the problem of hedging these multiperiod guarantees in the presence of transaction costs. We derive the hedging strategies for the cheapest hedge portfolio for a multi-period guarantee that with certainty makes the insurance company able to meet the obligations from the insurance policies it has is...

Pricing and Hedging of Cliquet Options and Locally Capped Contracts

This paper provides a new approach for pricing and hedging popular highly pathdependent equity-linked contracts. We illustrate our technique with two examples: the locally-capped contracts (a popular design on the exchange-listed retail investment contracts on the American Stock Exchange) and the Cliquet option (extensively sold by insurance companies). Wilmott [17] describes these types of con...