Pricing participating policies under the Meixner process and stochastic volatility

Shanahan, B, Alavi Fard, F and van der Hoek, J 2017, 'Pricing participating policies under the Meixner process and stochastic volatility', Scandinavian Actuarial Journal, vol. 2017, no. 7, pp. 559-583.


Document type: Journal Article
Collection: Journal Articles

Title Pricing participating policies under the Meixner process and stochastic volatility
Author(s) Shanahan, B
Alavi Fard, F
van der Hoek, J
Year 2017
Journal name Scandinavian Actuarial Journal
Volume number 2017
Issue number 7
Start page 559
End page 583
Total pages 25
Publisher Taylor and Francis Scandinavia
Abstract We propose a model for the valuation of participating life insurance products under the Meixner process, which belongs to the family of semi-heavy tailed processes. This particular model assumption is extremely desirable as it captures the stylised features of the return distribution, with existing moment generating functions. The highlight of the paper is the analytical solution derived for minimising the relative entropy between the historical and risk-neutral measures, when driving a pricing kernel. Further, we capture the stochastic volatility effect using an accurate polynomial approximation technique. Finally, to highlight the practical applications, we conduct a simulation experiment.
Subject Financial Mathematics
Financial Economics
Insurance Studies
Keyword(s) Participating products
stochastic volatility
Meixner process
MEMM
DOI - identifier 10.1080/03461238.2016.1193557
Copyright notice © 2016 Informa UK Limited, trading as Taylor and Francis Group
ISSN 1651-2030
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