Discussion on “ Capital Forbearance , Ex Ante Life Insurance Guaranty Schemes , and Interest Rate Uncertainty
نویسندگان
چکیده
Professors Hwang, Chang and Wu are to be congratulated for this interesting paper. The authors study ex ante insurance guaranty schemes. In particular, capital forbearance mechanism and stochastic interest rate are incorporated in their model, and an explicit formula for the risk-based premium of the insurance guaranty fund is derived. I am especially interested in Section 2.3 and Appendix A. In this discussion, I shall provide an alternative derivation of the fair premium P (0) given by formula (13) in the paper using the actuarial method of Esscher transform (Gerber and Shiu 1994, 1996; Shiryaev 1999; Bingham and Kiesel 2013). The paper decomposes P (0) into three parts: the premium for the audit window component P , the premium for the capital forbearance component P , and the premium for the grace period component P . It follows from formulas (5) to (8) in the paper that P (0) is given by
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