Pricing Pension, Life Insurance and Investment Products
- Publication Type:
- Thesis
- Issue Date:
- 2020
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This thesis considers the pricing of pension, life insurance and investment products under a general framework. In particular, this thesis considers the pricing under the risk-neutral framework, the benchmark framework and the utility framework. This thesis demonstrates how long term contracts can be less expensively produced with higher returns on investments under the benchmark framework than under the risk-neutral framework. This thesis works under the minimal market model, a parsimonious model for well diversified equity market indexes that incorporates the well documented mean reversion of equity returns and the leverage effect. This thesis uses historical equity returns data for out-of-sample backtests to demonstrate the effective hedging of long-term financial and insurance contracts.
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