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Article: Geometric stopping of a random walk and its applications to valuing equity-linked death benefits
Title | Geometric stopping of a random walk and its applications to valuing equity-linked death benefits |
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Authors | |
Keywords | Binomial and trinomial tree models Equity-linked death benefits Esscher transform Geometric stopping Random walk |
Issue Date | 2015 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime |
Citation | Insurance: Mathematics and Economics, 2015, v. 64, p. 313-325 How to Cite? |
Abstract | We study discrete-time models in which death benefits can depend on a stock price index, the logarithm of which is modeled as a random walk. Examples of such benefit payments include put and call options, barrier options, and lookback options. Because the distribution of the curtate-future-lifetime can be approximated by a linear combination of geometric distributions, it suffices to consider curtate-future-lifetimes with a geometric distribution. In binomial and trinomial tree models, closed-form expressions for the expectations of the discounted benefit payment are obtained for a series of options. They are based on results concerning geometric stopping of a random walk, in particular also on a version of the Wiener–Hopf factorization. |
Persistent Identifier | http://hdl.handle.net/10722/231322 |
ISSN | 2023 Impact Factor: 1.9 2023 SCImago Journal Rankings: 1.113 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Gerber, HU | - |
dc.contributor.author | Shiu, ESW | - |
dc.contributor.author | Yang, H | - |
dc.date.accessioned | 2016-09-20T05:22:18Z | - |
dc.date.available | 2016-09-20T05:22:18Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | Insurance: Mathematics and Economics, 2015, v. 64, p. 313-325 | - |
dc.identifier.issn | 0167-6687 | - |
dc.identifier.uri | http://hdl.handle.net/10722/231322 | - |
dc.description.abstract | We study discrete-time models in which death benefits can depend on a stock price index, the logarithm of which is modeled as a random walk. Examples of such benefit payments include put and call options, barrier options, and lookback options. Because the distribution of the curtate-future-lifetime can be approximated by a linear combination of geometric distributions, it suffices to consider curtate-future-lifetimes with a geometric distribution. In binomial and trinomial tree models, closed-form expressions for the expectations of the discounted benefit payment are obtained for a series of options. They are based on results concerning geometric stopping of a random walk, in particular also on a version of the Wiener–Hopf factorization. | - |
dc.language | eng | - |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime | - |
dc.relation.ispartof | Insurance: Mathematics and Economics | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Binomial and trinomial tree models | - |
dc.subject | Equity-linked death benefits | - |
dc.subject | Esscher transform | - |
dc.subject | Geometric stopping | - |
dc.subject | Random walk | - |
dc.title | Geometric stopping of a random walk and its applications to valuing equity-linked death benefits | - |
dc.type | Article | - |
dc.identifier.email | Yang, H: hlyang@hku.hk | - |
dc.identifier.authority | Yang, H=rp00826 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.insmatheco.2015.06.006 | - |
dc.identifier.scopus | eid_2-s2.0-84939243546 | - |
dc.identifier.hkuros | 263500 | - |
dc.identifier.volume | 64 | - |
dc.identifier.spage | 313 | - |
dc.identifier.epage | 325 | - |
dc.identifier.isi | WOS:000362133800027 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.issnl | 0167-6687 | - |