Approximation solutions for indifference pricing under general utility functions

An Chen, Antoon Pelsser, M.H. Vellekoop

    Research output: Contribution to conferencePaperAcademic

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    Abstract

    With the aid of Taylor-based approximations, this paper presents results for pricing insurance contracts by using indifference pricing under general utility functions. We discuss the connection between the resulting "theoretical" indifference prices and the pricing rule-of-thumb that practitioners use: Best Estimate plus a "Market Value Margin". Furthermore, we compare our approximations to known analytical results for exponential and power utility.
    Original languageEnglish
    Number of pages27
    Publication statusPublished - 2008
    Event7th Winter School on Mathematical Finance 2008: Lévy Models - Life Insurance and Pensions - CongresHotel De Werelt , Lunteren, Netherlands
    Duration: 21 Jan 200823 Jan 2008
    Conference number: 7
    https://staff.fnwi.uva.nl/p.j.c.spreij/winterschool/7winterschool.html

    Other

    Other7th Winter School on Mathematical Finance 2008
    CountryNetherlands
    CityLunteren
    Period21/01/0823/01/08
    Internet address

    Keywords

    • General utility
    • Indifference pricing
    • Nontradable insurance risk
    • Taylor approximation

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