Quantile hedging for equity-linked contracts

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

This paper analyzes the application of quantile hedging on equity-linked life insurance contracts in the presence of transaction costs. Following the time-based replication strategy, we present the explicit expressions for the present values of expected hedging errors and transaction costs. The results are derived by using the adjusted hedging volatility σ̄ proposed by Leland. Furthermore, the e...

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

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...

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 ...

The Uncertain Mortality Intensity Framework: Pricing and Hedging Unit-Linked Life Insurance Contracts

We study the valuation and hedging of unit-linked life insurance contracts in a setting where mortality intensity is governed by a stochastic process. We focus on model risk arising from different specifications for the mortality intensity. To do so we assume that the mortality intensity is almost surely bounded under the statistical measure. Further, we restrict the equivalent martingale measu...