Frontiers of Mathematics in China >

2011 , Vol. 6 >Issue 6: 1185 - 1202

DOI: https://doi.org/10.1007/s11464-011-0100-6

RESEARCH ARTICLE

Locally risk-minimizing hedging strategies for unit-linked life insurance contracts under a regime switching Lévy model

  • Linyi QIAN 1,2 ,
  • Hailiang YANG 3 ,
  • Rongming WANG , 1,2,4
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  • 1. School of Finance and Statistics, East China Normal University, Shanghai 200241, China
  • 2. Research Center of International Finance and Risk Management, East China Normal University, Shanghai 200241, China
  • 3. Department of Statistics and Actuarial Science, The University of Hong Kong, Hong Kong, China
  • 4. School of Mathematics and System Sciences, Shandong University, Jinan 250100, China

Received date: 15 Jul 2010

Accepted date: 20 Dec 2010

Published date: 01 Dec 2011

Copyright

2014 Higher Education Press and Springer-Verlag Berlin Heidelberg
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Abstract

This paper extends the model and analysis in that of Vandaele and Vanmaele [Insurance: Mathematics and Economics, 2008, 42: 1128-1137]. We assume that parameters of the L′evy process which models the dynamic of risky asset in the financial market depend on a finite state Markov chain. The state of the Markov chain can be interpreted as the state of the economy. Under the regime switching L′evy model, we obtain the locally risk-minimizing hedging strategies for some unit-linked life insurance products, including both the pure endowment policy and the term insurance contract.

Key words： Unit-linked life insurance; Lévy process; regime switching; riskminimization

Cite this article

Linyi QIAN , Hailiang YANG , Rongming WANG . Locally risk-minimizing hedging strategies for unit-linked life insurance contracts under a regime switching Lévy model[J]. Frontiers of Mathematics in China, 2011 , 6(6) : 1185 -1202 . DOI: 10.1007/s11464-011-0100-6

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