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Article: Geometric stopping of a random walk and its applications to valuing equity-linked death benefits

TitleGeometric stopping of a random walk and its applications to valuing equity-linked death benefits
Authors
Issue Date2015
PublisherElsevier 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?
AbstractWe 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 Identifierhttp://hdl.handle.net/10722/231322
ISSN
2015 Impact Factor: 1.378
2015 SCImago Journal Rankings: 1.000

 

DC FieldValueLanguage
dc.contributor.authorGerber, HU-
dc.contributor.authorShiu, ESW-
dc.contributor.authorYang, H-
dc.date.accessioned2016-09-20T05:22:18Z-
dc.date.available2016-09-20T05:22:18Z-
dc.date.issued2015-
dc.identifier.citationInsurance: Mathematics and Economics, 2015, v. 64, p. 313-325-
dc.identifier.issn0167-6687-
dc.identifier.urihttp://hdl.handle.net/10722/231322-
dc.description.abstractWe 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.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime-
dc.relation.ispartofInsurance: Mathematics and Economics-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleGeometric stopping of a random walk and its applications to valuing equity-linked death benefits-
dc.typeArticle-
dc.identifier.emailYang, H: hlyang@hku.hk-
dc.identifier.authorityYang, H=rp00826-
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.insmatheco.2015.06.006-
dc.identifier.hkuros263500-
dc.identifier.volume64-
dc.identifier.spage313-
dc.identifier.epage325-
dc.publisher.placeNetherlands-

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