Valuation of Equity-Linked Death Benefits on Two Lives with Dependence
The purpose of this paper is to investigate equity-linked death benefits for joint alive and last survivor individuals. Utilizing Farlie–Gumbel–Morgenstern (FGM) type dependency modeling framework, we first analyze the joint distribution of the couple (joint alive and last survival density) when mar...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-01-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/11/1/21 |
| _version_ | 1797437340497477632 |
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| author | Kokou Essiomle Franck Adékambi |
| author_facet | Kokou Essiomle Franck Adékambi |
| author_sort | Kokou Essiomle |
| collection | DOAJ |
| description | The purpose of this paper is to investigate equity-linked death benefits for joint alive and last survivor individuals. Utilizing Farlie–Gumbel–Morgenstern (FGM) type dependency modeling framework, we first analyze the joint distribution of the couple (joint alive and last survival density) when marginal distributions follow mixed exponentials and weighted exponentials distributions. Then, we derive the price of the guaranteed minimum death benefit (GMDB) product. In addition, we provide closed analytical expressions of the price of some financial contingent claim contracts (classical and exotic options). Furthermore, we present some numerical results to support our theoretical results. We show in our numerical example that it is important to model the dependency between two lives (couple) since the price changes as the copula parameter changes. |
| first_indexed | 2024-03-09T11:18:48Z |
| format | Article |
| id | doaj.art-07e07d0894c34292b11b2db23ac2be09 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T11:18:48Z |
| publishDate | 2023-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-07e07d0894c34292b11b2db23ac2be092023-12-01T00:23:36ZengMDPI AGRisks2227-90912023-01-011112110.3390/risks11010021Valuation of Equity-Linked Death Benefits on Two Lives with DependenceKokou Essiomle0Franck Adékambi1School of Economics, University of Johannesburg, Johannesburg 2006, South AfricaSchool of Economics, University of Johannesburg, Johannesburg 2006, South AfricaThe purpose of this paper is to investigate equity-linked death benefits for joint alive and last survivor individuals. Utilizing Farlie–Gumbel–Morgenstern (FGM) type dependency modeling framework, we first analyze the joint distribution of the couple (joint alive and last survival density) when marginal distributions follow mixed exponentials and weighted exponentials distributions. Then, we derive the price of the guaranteed minimum death benefit (GMDB) product. In addition, we provide closed analytical expressions of the price of some financial contingent claim contracts (classical and exotic options). Furthermore, we present some numerical results to support our theoretical results. We show in our numerical example that it is important to model the dependency between two lives (couple) since the price changes as the copula parameter changes.https://www.mdpi.com/2227-9091/11/1/21equity-linked death benefitslookback optionmulti-lifeFarlie–Gumbel–Morgenstern copulaweighted exponentials distributions |
| spellingShingle | Kokou Essiomle Franck Adékambi Valuation of Equity-Linked Death Benefits on Two Lives with Dependence Risks equity-linked death benefits lookback option multi-life Farlie–Gumbel–Morgenstern copula weighted exponentials distributions |
| title | Valuation of Equity-Linked Death Benefits on Two Lives with Dependence |
| title_full | Valuation of Equity-Linked Death Benefits on Two Lives with Dependence |
| title_fullStr | Valuation of Equity-Linked Death Benefits on Two Lives with Dependence |
| title_full_unstemmed | Valuation of Equity-Linked Death Benefits on Two Lives with Dependence |
| title_short | Valuation of Equity-Linked Death Benefits on Two Lives with Dependence |
| title_sort | valuation of equity linked death benefits on two lives with dependence |
| topic | equity-linked death benefits lookback option multi-life Farlie–Gumbel–Morgenstern copula weighted exponentials distributions |
| url | https://www.mdpi.com/2227-9091/11/1/21 |
| work_keys_str_mv | AT kokouessiomle valuationofequitylinkeddeathbenefitsontwoliveswithdependence AT franckadekambi valuationofequitylinkeddeathbenefitsontwoliveswithdependence |